Superfluous advice

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.