RI economy on treshhold of depression, Sumitro says
JAKARTA (JP): Indonesia's economics guru Sumitro Djojohadikusumo is suggesting that the government use US$3 billion to $5 billion out of the IMF-arranged $43 billion bailout fund to recapitalize millions of small and medium-scale businesses that have become virtually paralyzed.
Sumitro said over the weekend that small and medium-scale businesses were the backbone of the economy in terms of productive employment, real income and foreign exchange generation.
"Reinvigorating these businesses is most urgent and imperative now to rescue our economy, which is on the threshold of a depression," asserted the 81-year-old, who was a minister in the late 1960s and 1970s.
He said the government should lobby strongly the International Monetary Fund to immediately allocate between $3 billion and $5 billion out of its sponsored bailout fund into a trust fund to extend credits at concessional interest rates to small and medium-size businesses.
If the IMF does not agree on such an allocation, the government should allocate that fund from its international reserves, he added.
"These businesses are now crippled. But these small businesspeople do not know what has hit them, why prices suddenly are skyrocketing beyond their purchasing power, why many of their neighbors, relatives suddenly find themselves unemployed," Sumitro noted.
The Central Bureau of Statistics reported last week an 8.5l percent contraction in gross domestic product for the first quarter, predicted a total negative growth of over 10 percent for this year and inflation exceeding 85 percent.
"My own prediction is a contraction of between 10 and 15 percent and inflation minimally at 100 percent," Sumitro said.
He reaffirmed a suggestion he made several years ago that funds derived from 1 percent to 3 percent of profits of state companies which so far had been spent on the development of cooperatives should be pooled into an investment fund.
It would be much more efficient and effective to manage these funds under an investment fund instead of being spent separately by state companies, he added.
Sumitro said he had actually decided to retire from economic policy debates unless an emergency situation arose.
"The present crisis is a call of duty for me to speak my mind. Because in the hurly-burly of the nationwide clamor for overall reform, nobody seems to give attention to the fate of the millions of small and medium-size enterprises."
This, he hastily added, did not mean he wanted to belittle the importance of overall political, judicial and social reform. This reform instead was a precondition to a solution to the economic crisis.
"But while the reform agenda is being pushed through, we urgently need to revive small and medium-scale businesses to prevent a more devastating disaster," he pointed out.
He said he had received many letters from families in various provinces complaining about the severe economic hardships, the pains of having to discontinue their children's education.
"These hardships, in addition to the pervasive malfeasance and dishonesty within the state bureaucracy, were the main trigger of the nationwide student demonstrations over the last few months. They went out and expressed the aspirations of a segment of society which had long been ignored but which had remained silent."
Last January, Sumitro warned that the nation could plunge into a prolonged depression if economic and political reforms were not implemented speedily, firmly and consistently.
He said that what the country was facing was not merely an economic crisis but an explosion of the cumulative pain from a series of institutional diseases in the nation's entire political body.
Sumitro reiterated the urgency for overall bureaucratic reform to create good governance.
But the drive for overall reform from the central government down to village administration and the correction of past mistakes should always be based on the rule of law, he added.
"Racial, ethnic and religious prejudices should be abolished once and for all," he said. (vin)