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.