Tell the poor nothing but the whole truth

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.