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)