Tue, 06 Aug 2002

Rini's crisis center

Industry and trade minister Rini Soewandi's move to set up a crisis center in cooperation with business associations should be welcomed and supported as a fresh initiative to help reinvigorate the business sector through a mechanism that will focus on good coordination, fast decision-making and concrete programs of action.

As the minister in charge of manufacturing and trade that makes up core economic activities, Rini is greatly concerned over the worsening condition for investment and the steadily eroded competitiveness of Indonesia's export industry.

She is fully aware that without new investment the country's manufacturing industry will become increasingly less competitive because its obsolete plant equipment will make it grossly inefficient, unable to produce goods of higher value-added, and will render its products unable to meet changes in market preferences.

The almost 7 percent decrease in export revenues in the first six months of this year and the recent reports about how an increasing number of footwear and textile factories have lost foreign orders to competitors in other developing countries and how several major investors canceled their business plans in the country are greatly worrisome indeed.

There must be many things fundamentally wrong when Indonesia is losing in price competitiveness to such countries as China, Vietnam, Malaysia and India while the rupiah's foreign exchange rate remains almost four times less than it was before the 1997 crisis and its labor wages are still one of the lowest in the world.

All these worrisome developments seemed to have prompted Rini, who is known as a minister of fast, concrete action, to establish a sort of nerve center where her officials and businesspeople can frankly discuss and resolve any problems encountered in the manufacturing and trade sectors.

Skeptics might doubt the effectiveness of the crisis center, arguing that most of the obstacles to manufacturing plants and trade activities lie beyond Rini's authority.

True, most of the major problems that affect industry and trade such as inefficient and corrupt customs, port handling, poor transportation infrastructure, lack of credit financing, radical trade unions and uncertainty about tax assessment are outside Rini's authority to resolve.

Ideally, though, to be fully effective, such a crisis center should be headed directly by President Megawati Soekarnoputri herself or at least by the coordinating minister for the economy, given the good coordination and cooperation on the part of other ministers needed to resolve the various problems faced in manufacturing and trade activities.

The country, which is in its fifth consecutive year of an economic crisis, actually needed such a crisis-management center more than four years ago, but the President's top priority seemed to lie somewhere else.

Such a war-room like an operation center is needed to bring the political leadership face-to-face with representatives of the business community and bureaucratic agencies at least once a month to discuss and resolve problems of most urgency.

Any issues related to economic-crisis management such as asset sales, debt restructuring, privatization, credit financing, port clearance for imports, antibusiness rulings issued by local administrations, smuggling and other crucial reform measures could be settled quickly at the highest level of the executive branch.

The basic rationale of such a mechanism is that the management of an economic crisis should run like the emergency center of a hospital, where fast decisions and concrete programs of action are more important than bureaucratic procedures or rigidities.

Despite its inherent weaknesses and limitations, Rini's crisis center will nevertheless be able to at least keep her apprised of the problems in various areas encountered by businesspeople and will therefore enable her to bring up those issues to the Cabinet where resolutions can be decided at the highest level.

However, it would be better and more effective in helping resolve economic problems if the President or the Cabinet eventually makes a magnanimous decision to upgrade and broaden Rini's crisis center into an interministerial crisis center that works with the highest sense of urgency to resolve problems by executive fiat on the spot at least on a monthly basis.