RI economy on treshhold of depression, Sumitro says

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)