RI needs govt changes to renew confidence: Econit

JAKARTA (JP): Indonesia needs a major change of leadership and more democracy to restore its credibility and regain public confidence, the Econit advisory group said yesterday.

Econit director Rizal Ramli said a new government would create a new legitimacy and mandate and thus confidence and trust in the country would return.

"All countries which have come out of economic crisis began to recover after they changed their government," Rizal said, citing Thailand, Mexico and Korea as examples.

The basis of the New Order government's legitimacy over 30 years was economic development, which justified the lack of democracy and transparency, he said to reporters at Econit's Public Policy Review.

But within the last nine months, with the economy crumbling fast, many people began to realize the need to pursue democracy and openness, he said, adding that without it, confidence would likely not return.

"In a democratic country the burden of economic adjustment during a crisis is carried proportionally by all layers of society, but in a nondemocratic system like Indonesia, the lower and middle class are the ones having to bear the most burden," he said.

Rizal said confidence in the government had been severely eroded because "the gap between what's being said and what's being done is so wide."

The government also seemed to continue protecting the vested interests of certain groups through cronyism and nepotistic facilities, he said.

"Groups that were having parties before the crisis still continued having parties, instead of sharing the bills and cleaning the dishes," he added.

This was even more apparent in the formation of the Seventh Development Cabinet established last month which he said was "filled with nepotism and cronyism".

When many people were expecting a healthy cabinet free from conflict of interest, the government appointed several people with heavy business interests as policymakers, he said.

A conflict of interest was also apparent in the Indonesian Bank Restructuring Agency (IBRA), an agency consisting of representatives of private and government-sector banks set up by the government to rehabilitate the banking sector.

Several IBRA members hold positions in or could be linked to companies, which could prompt a conflict of interest, he said.

Rizal said Econit supported the many antigovernment protests which have been held almost daily by university students and professors across the country, saying this movement was just "the tip of the iceberg".

These protesters were voicing the same demands throughout the country, he said; a reduction of prices of basic goods, the elimination of corruption and nepotism in the system and a new state leader.

Econit's associate director, Laksamana Sukardi, said the student protests indicated that Indonesia was in a process of change, motored by the economic hardship.

"The only question is the speed of the process of change ... this is indicated by unemployment, price increases and repression levels," Laksamana said.

Econit also said yesterday solving the problem of private foreign debt, which was estimated at about US$68 billion, was also crucial for recovery.

It proposed a system to resolve the country's offshore private debts, by dividing debtors and foreign creditors into prudent and reckless categories.

The government must provide maximum assistance for the debtors and foreign creditors which have sound prudent lending and loan portfolios, Laksamana said.

The government, for instance, could guarantee convertible bonds issued by a specially set up "Independent Holding Company" of the good debtors to finance the debts, he said.

But the government must prosecute local companies which managed their loan portfolios recklessly, he said.

Banks and creditors guilty of reckless lending to local companies must bear the consequences of their risk and write off the loans.

However, the government must help minimize their losses by repossessing both the offshore and domestic assets of the debtors, and by putting debtors who refused to honor their debts on a blacklist, he said. (das)