Sovereignty at stake in govt-IMF deal, House warns

Sovereignty at stake in govt-IMF deal, House warns

JAKARTA (JP): Legislators pledged full support yesterday for
the government's commitment for sweeping economic reforms reached
after consultation with the International Monetary Fund, but
warned that it should not sacrifice the people and the country's
sovereignty.

House Speaker Harmoko hailed the government for making a
realistic decision and showing determination to cope with the
economic turmoil.

"It (the decision) did not come after the IMF pressure, but a
consultation that is intended to rescue us from the crisis,"
Harmoko said. "It's necessary for a big country like Indonesia to
seek good advice in a bid to make progress."

Harmoko was commenting on the 50-point letter of intent signed
by President Soeharto earlier yesterday, which included the
abolition of monopolies, tax privileges granted to the
controversial national car program and subsidies on oil prices.

Soeharto said the government would overhaul the state budget,
revising the average exchange rate used to Rp 5,000 instead of Rp
4,000, to the U.S. dollar and zero GDP growth for 1998, compared
to an earlier forecast of 4 percent. Inflation under the revised
budget was projected at 20 percent, compared to 9 percent
previously.

The House yesterday also delayed a plenary session to look
over the draft 1998/1999 state budget delivered by the President
on Jan. 6, following news that a revised draft was pending.

Harmoko, who is also chairman of dominant political group
Golkar, said the President's approval of the IMF clauses would
restore public confidence.

Separately, I Gde Artjana of the Armed Forces faction, Hamzah
Haz of the United Development Party (PPP) and Budi Hardjono of
the Indonesian Democratic Party (PDI) all said that as a
sovereign country, Indonesia should not blindly take the IMF
requirements for granted if they lay too heavy a burden on the
people.

"The government should not force itself to comply with the IMF
conditions because I don't think we can fulfill them all.

"If some requirements are considered illogical and impossible,
IMF will be open for further negotiations, because it doesn't
want to see Indonesia collapse," said Artjana, who chairs the
House Commission XIII for finance and the state budget.

Artjana said the inflation forecast, the highest under the New
Order, would cause a sharp decline in people's purchasing power,
increasing unemployment and social instability.

"We hope the government will be transparent in explaining the
basis of its acceptance to the letter of intent during the
deliberation of the state budget," he said.

Hamzah, chairman of the PPP faction in the House, said the
phasing out of subsidies on the fuel price would automatically
trigger a price hike, not only in fuel but also basic
commodities.

"We have to think seriously about the consequences of the IMF
prescription, because prices will skyrocket while most people's
income will remain the same," he said.

He suggested the government encourage business activities by
providing more facilities and extend labor-intensive projects to
prevent escalating unemployment.

Subsidies

Chairman of the PDI faction Budi opposed the abolition of fuel
price subsidies, saying it would adversely affect national
industries.

"Instead of scraping the subsidies, I would prefer a strict
efficiency of energy," he said.

Hamzah said the government's commitment should have come
earlier, or at least appeared in the state budget now being
revised.

"We repeatedly questioned the government over the reform plan
during our informal talks prior to the state budget
announcement," Hamzah said.

Political and economic observer, Amien Rais, welcomed the
government-IMF deal yesterday, but regretted that the decision
had come so late.

"I'm happy to see the government's consistency in carrying out
economic reform. My only disappointment is that the commitment
was made only after the country's economy reached a critical
stage," Amien told reporters after a meeting with several
government critics yesterday.

"Some of our economists have, in fact, long suggested the
necessity for such a reform," he said.

Amien, chairman of the 28-million-strong Muhammadiyah Moslem
organization, said economic reforms should not stand alone but be
followed by political reform.

"Economic reforms to settle the monetary crisis in the absence
of political reform, is only daydreaming," he said. "Without
political reform, violations of economic norms and principles
will remain."

He suggested the government learn from the economic reforms in
Thailand and South Korea, which were followed by a restructuring
of their state leadership.

Another noted Moslem figure, Abdurrahman Wahid, leader of the
Nahdlatul Ulama (NU), predicted mounting social unrest would
follow austere economic reforms, but believed they would not last
long.

"It's not surprising if the inception of the reforms will
firstly cause more unrest," he said after installing the board of
executives of the Indonesian Moslem Students Movement (PMII) here
yesterday.

He suggested the government anticipate the upheaval, and
change its traditional security approach in dealing with the
public's demands.

"The government will regain public confidence if it manages to
draw up comprehensive measures to anticipate social unrest," he
said. (09/imn/amd)