Separate politics from economy

Separate politics from economy

From Media Indonesia

As a layman in political and economic affairs, I can only feel
deeply concerned about recent political developments. Conflicts
involving the political elite have often led to social turmoil at
the grassroots level. These conflicts and social turmoil have
often prompted speculators in the money market to buy up U.S.
dollars, consequently causing a drop in the value of the rupiah.

This drop will have a wide-ranging effect, for example (i)
Indonesia's offshore debt burden becomes heavier, a condition not
conducive to the 2001 state budget, where Rp 7,800 is assumed to
be worth US$1, and (ii) foreign investors will take a wait-and-
see attitude. The eventual result will be an increase in the
prices of daily commodities and other products and in this
situation it is the ordinary people that will be the hardest hit.

This newspaper reported recently that an expert had suggested
the need for the separation of political affairs from economic
matters. I find this suggestion interesting because there is
usually a strong link between politics and the economy,
particularly in respect to the value of the rupiah.

One of the ways to separate political issues from economic
matters is the application of an interventionist idea. Money
speculators would be allowed to exploit political issues in their
speculation in the money market but the government would have to
offset the impacts of this speculation by pegging the rupiah to a
particular foreign currency. This exchange rate would have to be
adopted in the 2001 state budget, the payment of offshore debts
incurred by the government/private sector and export and import
transactions.

On a micro scale, a number of insurance companies have pursued
this policy. The adoption of this policy is aimed at facilitating
insurance premiums in foreign currencies and preventing very high
losses owing to the fluctuation of the rupiah. It is hoped that
this nation can quickly get out of the crisis with the
application of this interventionist system with the support of a
clear government agenda, vision and mission in solving national
problems.

LEONAR MANURUNG

Jakarta