'Three good' will save the country

JAKARTA (JP): Former Bank Indonesia director Boediono said yesterday that only "good policy, goodwill and good luck" would save the country from its worst-ever economic crisis.

Former finance minister Frans Seda added that all problems could be tackled but only if the government was trusted by the people.

And former Bank Indonesia governor J. Soedradjad Djiwandono said the crisis would end when efforts to strengthen the banking system bore fruit.

Low-profile Boediono, who lost his position last month, said good policies would be those pursued to support the International Monetary Fund (IMF)-sponsored reform package.

"The only logical policies which can be accepted by the market will be those in the framework of the IMF package," Boediono said at a seminar hosted by the Indonesian Forum.

The seminar, which focused on negotiations between the government and the IMF, featured noted economist Anwar Nasution from the University of Indonesia and banking expert Rijanto Sastroatmodjo as speakers.

Boediono suggested the government implement all points in the third agreement with the IMF, which would possibly be concluded next week.

"This will be our last chance to convince the market," Boediono said.

He said the government should also show goodwill that it was being cooperative with the international community.

"Goodwill is a key to restoring international confidence," he said.

International confidence was important not only because it would lead to foreign capital inflows but also because domestic investors would follow suit by reinvesting their money in the domestic market.

However, Boediono said, Indonesia's economic recovery would still depend very much on "good luck".

"I still believe in good luck, in God's power. However, in order to have good luck, we have to be honest, we must practice what we preach," he said.

Frans Seda agreed and said the government should stop practicing "trial and error" in its decision-making because it affected the lives of 202 million people.

"Think deeply first before you issue something affecting the lives of so many people," he suggested.

He said the finance minister's removal of the 5 percent tax on foreign exchange transactions even before it came into force only confirmed the government's lack of credibility.

"As a former finance minister, I feel ashamed with that kind of decision," he said.

In a time of low public confidence in the government, the government should improve its image by pursuing consistent policies and moving toward protecting all people's interests, not just the interests of certain people.

"All the problems we are currently facing could be solved if the government was credible enough in the eyes of the people," Seda said.

Soedradjad said economic recovery would be determined by the government's success in restoring the health of the banking sector.

"All people say that the source of all problems is the weakening rupiah. But the problems do not emerge because of the rupiah's weakening exchange rate alone, but more because of the weak financial system," Soedradjad said.

"Whatever policy the government takes now will be haunted by the weak banking system," he added.

He said it would take some years to make the banking system healthy.

Rijanto shared Soedradjad's view and said it would take at least three years before the banking system functioned normally again.

Anwar added that the fate of the banking system depended largely on the Indonesian Bank Restructuring Agency (IBRA), not on Bank Indonesia.

"We do not trust the results of Bank Indonesia's supervision of our banks anymore because there have been so many collusions and other poor practices," Anwar said.

"Now the test case will be on the IBRA. If IBRA proves to be a credible agency, it will help restore public confidence in the banking system. If not, then I don't know what else the government can do," he added. (rid)