Political change key to recovery: Expert

Political change key to recovery: Expert

JAKARTA (JP): Democratic political change is essential to
foster economic recovery and improved social harmony, a visiting
Philippine expert said on Wednesday in drawing on his country's
experience.

Jesus P. Estanislao, a prominent academic who served in
Corazon Aquino's Cabinet, said his government focused on
political reform before restructuring the economy to bring the
country out of crisis in the late 1980s.

"We focused very much on politics. Unless there is political
change, no economic and social changes would happen," he said at
the 1999 Panglaykim memorial lecture.

Indonesian economist Mari E. Pangestu agreed that political
change was a basic prerequisite for economic recovery.

She noted the success of Indonesia's current economic recovery
programs, including the massive banking recapitalization,
depended heavily on stability of macroeconomic indicators.

Improvement of macroeconomic indicators like inflation and
exchange rates hinged on political change, she said.

Estanislao said his government's political measures included
establishing an independent judiciary, installing a "noisy,
noncooperative" legislature through elections, introducing a new
constitution, guaranteeing press freedom and reducing the
military role.

"We needed three years to bring the soldiers back to barracks
and keep them there. Of course, they were not very happy. So, you
have to be patient."

He acknowledged there always would be strong resistance from
the military and incumbent government, which would try to cling
to power through various ways, including intimidation, violence
and deception.

However, he believed an unwavering public endorsement of
democracy would succeed in bringing about political change, a
prerequisite for economic restructuring.

After political change was in motion, the government would
have more room to restructure economic institutions to provide
solid fundamentals fur sustained growth.

The Philippines initially moved to clean up the financial
system of bad assets and restructured corporations.

With the help of international lending institutions, the
Philippines revamped the banking sector but "it took five years
just to clean up the books of the central bank".

He said in the beginning of the restructuring process, the
debt-service ratio -- the ratio of foreign debt servicing to
export earnings -- was 40 percent. It fell to 18 percent in the
Aquino administration's last year in 1992, and was 12 percent
when Fidel Ramos took office.

"With that restructuring, our corporate and financial sector
is probably better prepared to cope with current crisis," he
said.

Estanislao suggested that all countries in East Asia and
Southeast Asia use the crisis as an opportunity to forge closer
links to prevent another crisis in the future.

"We have sunk together. Perhaps, we can swim together too."

Choosing to go it alone, he warned, would require huge amounts
of funds and take longer to achieve.

Quoting World Bank figures, Estanislao noted the crisis-hit
economies in the region would need only US$10 billion of
additional foreign funding to support new fiscal stimulus
equivalent to 1 percent of their GDP.

It also would have the potential to boost their real GDP by as
much as 2 percent.

Estanislao also suggested more cooperation among authorities
in the region in restructuring the financial sector and the real
sector, as well as maintaining currency stability.

He cited five founding members of the Association of Southeast
Asian Nations -- Indonesia, Malaysia, the Philippines, Singapore
and Thailand -- plus Hong Kong and Taiwan as the most prepared
nations for such regional cooperation. (rid)