Save our sinking ship

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.