RI told to speed up reforms to cope with slump

RI told to speed up reforms to cope with slump

Vincent Lingga, The Jakarta Post, Hong Kong

Indonesia had no alternative but to stay on course and speed
up reforms and structural measures to cope with the likely full-
blown global economic recession exacerbated by the impact of the
Sept. 11 terrorist attacks on the United States, international
analysts asserted in Hong Kong on Monday.

"The market punishment for poor policies is likely to be
harsher and quicker than before," warned Shigemitsu Sugisaki,
deputy managing director of the International Monetary Fund (IMF)
at the East Asia Economic Summit 2001 organized by the Geneva-
based World Economic Forum.

Sugisaki predicted that the economic growth of East Asia,
excluding China, would plunge to a mere 1.2 percent this year
from 6.5 percent last year, as the world's largest economic
locomotives, the U.S. and Japan, would be pushed deeper into
recession.

Hubert Neiss, formerly Asia Pacific director of the IMF,
concurred that governments in East Asia should accelerate
restructuring to restore confidence.

"The markets will take very badly any retreat from reforms or
attempt to tinker with control or regulating mechanisms already
in place," cautioned Neiss, who from 1997 to 2000 was in charge
of supervising reforms in Indonesia under the IMF bailout
program.

Neiss warned that if, for example, Indonesia significantly
eased its monetary and fiscal policies now to generate economic
pump priming, market confidence in the country could collapse
altogether.

The opening day conference of the summit, which consisted of
four individual plenary sessions, two parallel plenary meetings
and one business luncheon, was occupied almost entirely with
analyses on the impact of the gloomy global economic outlook on
East Asia.

Even though the dozen analysts who acted as panelists at the
sessions agreed that the current recession in East Asia was
qualitatively different from the slump in 1997, they charted out
a much more difficult period for the next one to two years.

President of the Philippines Gloria Macapagal Arroyo was also
bearish about economic prospects, saying that the global economy
now seemed to have been pushed over the edge into a full-blown
recession.

"It is therefore imperative that East Asian political leaders
seize the opportunity to take the bitter pill of oft-postponed
reforms," President Arroyo asserted in a keynote address to the
meeting.

Businesspeople and analysts seemed to be worried about the
latest situation in Indonesia, especially after the U.S. attacks
on Afghanistan, asking how the backlash would affect political
stability and President Megawati Soekarnoputri's political
survival.

Jusuf Wanandi, chairman of the Jakarta-based Centre for
Strategic and International Studies, however, assured
participants at the meeting that the situation in Indonesia was
not as bad as they might have read in the print media or saw on
television.

After initial confusion over the action taken by the U.S., the
mainstream Muslim community had now been more assertive in their
condemnation of terrorism and any form of violence such as
"sweeping" against Americans.

"However, the U.S. should work hard to build up a supportive
environment of public opinion in the fight against terrorism and
encourage more regional and national initiatives for the campaign
against terrorism," added Jusuf, who became a panelist at two
plenary sessions in the morning and the afternoon.

He acknowledged, though, that the short wave of anti-American
demonstrations in Indonesia had done some damage to Indonesia's
image, blaming what he saw as the overblown treatment of the
event by the mass media, which gave the perception that a small
group of radicals controlled the national agenda.

Theo F. Toemion, chairman of the Investment Coordinating
Board, also assured foreign businesspeople and analysts that the
political and security condition in Indonesia was not as fragile
as many might have perceived from what they read in newspapers or
saw on television.

"Many right policies have been put in place and we are now
preparing a new investment law to replace the 1967 foreign
investment law, which would provide equal treatment to both
domestic and foreign investors," Toemion added.

Toemion acknowledged that if things seemed not to progress as
fast as they should be at the moment, it was because the country
was learning democratic practices.

However, Adam Schwarz, senior consultant at McKinsey Company
in Jakarta, noted that Indonesian country risk premium had been
rising due to the backlash from the U.S. attacks on Afghanistan.

Foreign investors, Schwarz added, although still interested in
Indonesia, seemed worried about inadequate policy direction and
weak policy implementation.