'Social distress' the next crisis to threaten Indonesia
JAKARTA (JP): The government must quickly address the social impacts of its economic reforms to prevent the country from sliding into a more severe situation, economists say.
"The great challenge Indonesia is facing in this economic crisis is the spillover effect into society," said senior economist Frans Seda.
The former finance minister explained that Indonesia was entering a new crisis which, if not properly and timely handled, would be far more severe than the current economic crisis.
Although all fiscal and monetary targets have been met and the rupiah is fairly stable, social hardships must still be addressed, he said, pointing out that the situation could only improve with the return of economic growth and employment.
"The government should be more accurate and swift in dealing with hunger, epidemics and poverty, which could trigger a dangerous social crisis," he said.
He explained that people needed hope to endure their current and future hardships. Such hope must come from the confidence that the government would be able to solve the crisis, he said.
The government has recently implemented several economic measures, part of wide-ranging IMF-sponsored reform programs, including the raising of fuel, electricity and public transportation prices.
Coupled with the fallen value of the rupiah and skyrocketing inflation, the new measures have been a big blow to many people, especially those who have been laid off following massive reductions in many business operations.
Economist Sri Mulyani said that to prevent social apprehension over the unpopular economic policies, the government must establish public confidence.
"Unpopular policies can only be delivered by a popular government that is supported by the public," she said.
Current hardships, she said, would only escalate during the next six months.
She explained that public support could only be achieved if the government showed that it was serious in reforming the country's political system.
The bureaucracy must also be reformed to insulate it from the business sector, she added.
"This would show that the government's policies are representing the interest of the people, not the interest of certain business groups," she said.
Frans agreed that economic reform was not sufficient in and of itself to regain public confidence and credibility.
He stressed that the government and the military should not take repressive action against student demonstrators because it would only trigger radicalism and international doubts over Indonesia.
"The aim of political reform is to bring about good governance," he said.
Senior economist M. Sadli said that a by-product of implementing the IMF-sponsored economic reforms would be administrative and political reform.
"The IMF package is promoting more transparency and fairness in handling tenders and contracts," he said, adding that this would open the door to political change.
He, however, doubted whether drastic political change, as demanded by students and intellectuals, was the best way to establish a more popular and stronger government.
He explained that although it was clear that the current government did not have the support of all sections of society, it was still supported by the strong military, bureaucracy and Golkar, the largest political organization.
"If they still give their support, I don't think the students can make a change," he said.
He explained that many governments in the world would not dare take painful reforms, including raising fuel prices, amid economic hardship, but that President Soeharto did.
"This indicates that the strength of the current government is still there," he said.
He also added that although the country's economic team occasionally made confusing remarks, they were regarded as effective, including by the IMF.
"Although they're not the best, they managed to persuade the President to implement the painful measures," he said. (rei)