Save our sinking ship

While senior government officials go to great lengths to publicly portray a much rosier outlook of the economy than what is perceived by the general public, privately they do not hesitate in pouring out their great concerns, fully sharing the views of most private sector analysts that our economy is indeed very much like a sinking ship.

It is acceptable for the government to present a public face aimed at preventing expectations of an economic doomsday because, as in politics, the market forces rely very much on public perceptions. What is frightening, though, is that the government, which is supposed to be much better informed of the real situation, still refuses to translate its great concern into action, deluding itself with the belief that the country will eventually muddle through the crisis.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti has acknowledged worsening economic conditions as a result of the far-reaching impact on the global economy of the Sept. 11 terrorist attacks on the United States. However, more than one week after his announcement that the government would design Plan B -- a new package of emergency measures -- he is still collecting working papers from national and international institutions. And while the ship is sinking deeper all of these papers will still have to be discussed in what he described as a national brainstorming conference to determine the best emergency package.

Does the government really believe that it can still come up with quick fix measures? We have great doubts that there are alternative policy instruments other than those already identified in the August reform agreement with the International Monetary Fund.

The economic woes now being faced by the nation are still very similar to those that surfaced after the 1997 crisis. The only difference is that the magnitude of the problems is now much greater because the global economy that helped bolster Indonesian exports is in trouble. It would be a miracle if 2000 export levels could be maintained.

The other economic engine -- private consumption -- is also sputtering. All surveys have concluded that both consumer and business confidence are now weakening due to the new uncertainty created by the continuing wave of anti-American demonstrations.

The ailing banking sector has not yet resumed its intermediation function and new lending remains insignificant due to the high risks of business. Pump priming from fiscal stimulus? Don't even think about it.

The government is technically bankrupt, with debts already exceeding 100 percent of gross domestic product (GDP). Likewise, investment is out of the question, given the high-risk premium attached to the country in view of the weak law enforcement and complications arising through the implementation of regional autonomy.

The 2001 fiscal deficit is in danger of ballooning far beyond the 3.7 percent of GDP targeted because, with less than 10 weeks until the end of this fiscal year, revenues from asset recovery and debt restructuring programs are still way below the set targets. Worse still, not a single cent of the Rp 6.5 trillion (US$650 million) expected from the privatization program has been collected.

We are extremely worried that without several successful reform measures to improve confidence in the government's credibility, the social and political environment will not be conducive to more painful measures -- increases in fuel, electricity and telecommunications prices -- that have to be taken next year to slow down the economic bleeding.

What is urgently needed now is not a national brainstorming conference to iron out a new emergency package, but real and fast action by the government to push through the programs concerning asset recovery, debt restructuring and privatization, as well as broadening the tax base and implementing banking sector reforms.

Only when the attitude and actions of the leadership filter through to the bureaucracy's lowest ranks and fully reflect the urgency of the situation, will the government earn the credibility and authority required for developing a national disposition among the public and all political leaders for mutual cooperation in saving our sinking ship.