'Three good' will save the country

'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)