Tell the poor nothing but the whole truth

Government officials are optimistic in the wake of encouraging recent economic data but economist Kwik Kian Gie sees harder burdens ahead for the poor.

JAKARTA (JP): State Minister of National Development Planning Budiono is upbeat about Indonesia's economic outlook because the rupiah has remained stable at about Rp 7,500 to the U.S. dollar in spite of a series of riots in the capital and other cities.

He said recently that the economy had bright prospects because macroeconomic parameters were improving. This would encourage factories to restart operations, offering job opportunities and propping up people's purchasing power.

In 1999, the rupiah is likely to remain stable in spite of social and political upheavals, inflation will drop to about 10 percent from this year's estimate of about 80 percent and the contraction of the GDP to decrease to 2 percent from this year's 15 percent.

We cannot blame Budiono, who is also chairman of the National Development Planning Board (Bappenas), because he, as an economist, will surely say that 2-percent contraction is better than 10-percent contraction even though the former figure will still mean increasing poverty and unemployment.

So, there is a paradox between the language used by economists and that used by the poor. When inflation, for example, is said to decline from 80 percent in 1998 to 10 percent in 1999, that means that the price of a product worth Rp 100 in early 1998 will increase to Rp 180 at the end of this year and rise again to Rp 198 at the end of 1999. Economists, who focus their attention on trends, will say that such a price development is good because the rate of the increase is smaller in the second year. But such logic neglects the fact that the poor, who make up the majority of the population, will get even hungrier because their earnings will decline while prices are increasing.

Actually, the improvement of the macroeconomic parameters has not been caused by an increase in production efficiency but by the inflow of official foreign loans. The government should have used part of the money to finance programs aimed at supporting production and trade, which will help the country improve its capability to repay the loans. But the government thus far has never talked about such programs.

Government officials just express their pride that the International Monetary Fund (IMF) has been disbursing its US$43 billion bail-out aid to Indonesia as scheduled. They never explain how the money has been spent.

A Cabinet minister has even expressed his joy that Indonesia is currently categorized as a poor country, which means it is now eligible to apply for interest-free International Development Assistance (IDA) , soft loans.

Because the government has never explained whether the aid disbursement will help improve Indonesia's production capability, it is unclear whether the country's capability to pay the new debt is improving.

Apparently realizing that its current authority is temporary, the government is focusing its attention merely on short-term (one-year) programs to improve its image at the expense of the country's long-term interests. It does not seem to be concerned whether its routine budget will continue to be in deficit 12 months from now or whether the IMF will continue providing aid for Indonesia.

The current government leaders are behaving just like executives of a multinational company who have been assigned to manage its Indonesia branch for one year. They are doing whatever they can to improve the branch's performance during the year, in the hope that they will earn credit points and thus be promoted and assigned to carry out another job in another country. They do not care whether the new executives in charge of the Indonesian branch will face difficulties in the longer term.

So, during this era of supposed reform and transparency, the government should provide better information for the people. Ministers, for example, must provide more explanations about government programs to improve the country's production, trading and transportation sectors, and how such programs will help improve the country's affordability to pay its debts -- when the country will be able to start paying its debts, how big its annual debt services will be and when the debt services will decline to a sustainable level.

The government should also avoid issuing illusive, misleading statements that encourage people to expect too much from the economy. As stated above, even though the declining figures for negative growth can be interpreted by economists as a good sign, the reality for the poor is different. People who have been encouraged by such misleading statements might be disappointed when they learn the reality the hard way. In the last month we have seen all too vividly what disappointed people can do.