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.