Soeharto's reassurance

Soeharto's reassurance

Analysts and mass media editors seemed to read deeply into President Soeharto's reassurances last Friday that his government would continue economic deregulation and bureaucratic reform measures. The President told the first conference of the Ministry of Industry and Trade, after the merging of the trade and industry ministries last December, that economic and bureaucratic reform measures would be continued to further improve the country's international competitiveness.

Soeharto talked about the urgent need to remove all unnecessary bureaucratic hurdles and to strengthen the export drive. He also reiterated the need for concerted efforts to make things easier for investors to do business. He reaffirmed many other things that should become the hallmarks of a market economy. All should have been music to businesspeople's ears.

There was actually nothing new in the remarks as they have been repeated often enough. What was emphasized in the speech has by and large been translated into policy measures since the middle of 1985. The mass media might have buried the speech in their inside pages had it not been for the events that immediately preceded the policy reaffirmation.

The tone of the speech and the urgency of the message were seen as significant, particularly so since the last few weeks recorded what businesspeople and analysts criticize as gross inconsistencies in government policies. In early February, the government granted a 25 percent tariff protection to PT Chandra Asri's olefin industry, after persistently announcing that it would not offer any protection to the petrochemical plant.

The private monopoly of clove trading was extended for three years without any transparent assessment of its performance. Then the automobile industry was jolted by what the government calls a National Automobile Program which appointed only one -- a newly- established car company -- to enjoy import tariff and luxury sales tax breaks for car assembly for the next three years.

The new car industrial policy has apparently so deeply "burned" the Japanese government and carmakers, who presently dominate over 90 percent of the Indonesian market, that Japanese Ambassador Taizo Watanabe went so far as to be rather undiplomatic in his criticism of the way the new policy is being implemented.

Industry and Trade Minister Tunky Ariwibowo has tried to reassure the business community of the government's consistency regarding the ongoing economic reform process, arguing that the protection of Chandra Asri and the tariff and tax breaks to PT Timor Putra Nasional car assembler were the exceptions rather than the rule. Yet businesspeople and analysts, apparently aware that Tunky simply does only what he is told, remained jittery.

It was against these backdrops that most analysts and businesspeople read President Soeharto's remarks last week. Whether the statement proves more convincing than Tunky's previous assurance will depend on what the government delivers in the next batch of reform measures. Businesspeople keenly await the government's promised overall reform of state companies. They also eagerly anticipate significant measures to remove unnecessary levies and the abolishment of illegal ones. The measures which have been launched so far were surely only a small token of what was promised to be a drastic reduction of the costs of doing business.