Wed, 22 Mar 2000

Superfluous advice

Even though chief economic minister Kwik Kian Gie welcomed President Abdurrahman Wahid's decision to appoint another team of economic advisors, in addition to the two teams already installed, no one is fooled by the real message of the move. It signals Abdurrahman's disappointment with the performance of the Kwik-led team that is populated mainly by ministers: of finance, trade and industry, investment and state enterprises, forestry and plantation, agriculture, mines and energy and transportation and communications.

The new team will be headed by Widjojo Nitisastro, the architect of Indonesian economic development from 1967 to 1983. He continued as advisor to Soeharto until early 1998 when the economic bubble burst into a multi-dimensional crisis that still engulfs the nation.

We have observed instances when miscommunication and poor coordination between Kwik's team of economic ministers resulted in inconsistencies in several major policy measures. The economy, despite its nascent recovery since late last year, remains in the doldrums with most domestic and foreign investors preferring to wait on the sidelines.

But simply blaming Kwik and other economic ministers, who are less than five months on the job, for all the economic woes that have been dogging the country is not fair. It should be expected that Kwik, with no experience as a Cabinet minister, let alone as the economic coordinating minister, would need a learning process, especially when one considers the different political parties and organizations represented on his team.

Moreover, some of the hurdles and bureaucratic inertia often confronting Kwik were brought about partly by President Abdurrahman, himself, by accommodating all major political parties in his Cabinet. Appointing politicians to the Cabinet would not have posed major problems had the bureaucracy been as solid and professional as those in more developed countries such as the U.S., Japan or South Korea. But the bureaucracy inherited by the present government was designed, built and honed by former president Soeharto to serve his autocratic administration and it is still mounting formidable opposition to Abdurrahman's reform programs.

This being said, we don't think the problem lies in a dearth of advisors. Abdurrahman's list of economic advisors already includes such well known personalities as former prime minister of Singapore, Lee Kuan Yew, and former U.S. Fed chief Paul Volcker. Senior economist Emil Salim, a member of Widjojo's economic team under Soeharto, leads the President's National Economic Council of advisors. On top of this, the National Business Development Council, headed by businessman Sofjan Wanandi, advises the President on practical business issues.

One wonders what Widjojo Nitisastro has up his sleeve to speed up the economic recovery while the major hurdles hindering such a recovery are crystal clear: the inimical condition of the political apparatus, the security organizations and the legal system; the slow pace of decentralization; and too much outside interference in the debt, corporate and bank restructuring. These difficulties did not confront Widjojo under the Soeharto administration.

Whatever the advice Widjojo may prescribe, nothing will improve the economy unless the tens of thousands of bad corporate debts currently under the Indonesian Bank Restructuring Agency (IBRA) are satisfactorily restructured or sold to new investors. Foreign investor confidence will never be regained unless the US$63 billion in corporate debts to foreign creditors are rescheduled. The real sector will remain debilitated for lack of lifeblood as long as IBRA and the central bank are still embroiled in technicalities over the recapitalization and restructuring of state and private banks.

Resource-based industries such as mining, fisheries and plantations, supposedly, the most promising areas for new investment, will remain shunned by investors as long as local administrations are dissatisfied with the progress of decentralization.

We should also remember that when it comes to economic policy, Indonesia, as 'a patient' of the International Monetary Fund until the end of 2002, must implement the crisis management programs as stipulated in the January, 2000 Letter of Intent from the government to the IMF. In fact, the agreement, also approved by the House of Representatives, is perhaps the only coherent economic policy document available right now. It is so detailed with policy measures and their implementation schedules, that Kwik's team now works like a cockpit crew flying a jumbo jet with an automatic pilot.

So instead of overshadowing and irritating his economic ministers with so large a number of outside advisors, President Abdurrahman should further empower Kwik's team to focus on speeding up the debt, corporate and bank restructuring and enable his entire Cabinet to zero in on development of good governance, including reform of the judiciary and the decentralization of the administration, as stipulated in the agreement with the IMF.