Transparency, consistency needed in banking sector
JAKARTA (JP): To support the rupiah, the government should improve transparency in the banking sector, dismantle inconsistent policies and give details of its reform package, economist Anwar Nasution said.
Common people were still in the dark about the country's banking situation because the monetary authority had never stated the condition of each bank to the public, he said.
"Nothing is clear about our banking industry. Even Bank Indonesia's weekly reports never tell us about the condition of our banks," Anwar told The Jakarta Post.
It was crucial for the central bank to improve transparency in the banking sector to restore the confidence of both foreign and domestic investors in the country's banking industry and currency.
Besides banking transparency, Anwar said the government should dismantle or reschedule projects inconsistent with the government's current austerity policy to convince investors that its reforms were broad enough.
He named the national car and strategic industrial projects as programs which were draining the country's foreign exchange reserves, while not producing any significant revenue in foreign exchange.
Pursuing and maintaining such ambitious, foreign exchange- consuming projects were not viable in the current situation when the country was in dire need of foreign exchange.
"Not only do they drain foreign exchange reserves, those projects, especially the tax and duty-exempted national car, also burden the state, provincial and regency administrative budgets," Anwar said.
It burdened the state budget because the government had to bear all duties and luxury taxes of the national car, the Timor car, imported from South Korea.
Provincial and regency budgets were affected because their administrations were obliged to purchase a certain number of Timor cars.
Pursuing transparency in the banking sector and dismantling inconsistent policies were not enough, as the central issue in restoring confidence would be the details of the multi-billion dollar rescue package from the International Monetary Fund (IMF).
"To restore confidence, we must publicize the details, not only state the broad outline," Anwar said.
If the government was targeting to reach a budget surplus of one percent of the gross domestic product in the current and next budget, it should explain in detail how it planned to reach such a surplus.
"We are in the dark about how the government will increase its revenue and reduce spending. We are waiting for the details," he said.
If the government wanted to raise tax rates, for instance, the private sector would be eager to know which taxes the government would plan to increase.
Information on cuts in governmental expenditures would also be important for the private sector to anticipate which sectors, particularly which subsectors, would be most affected.
"Such details of the IMF package are important, particularly for the private sector to plan for the short and medium terms," Anwar said.
The IMF has put together a US$23 billion assistance package for Indonesia, supplemented by billions of dollars in bilateral commitments from several other countries, to bail out the country from its economic crisis.
Anwar also reiterated the importance of fiscal discipline by incorporating all state revenues into the state budget and paying all state expenditures from the budget.
"The situation now is similar with that in 1966 when all state departments managed their own budgets by raising their own tactical incomes," Anwar said.
On top of this, the government needed to make a united official statement concerning government actions, Anwar said.
Coordination among government institutions and departments was lacking, resulting in conflicting statements by different officials, he said.
"It is high time for government officials to make coordinated statements on one issue so that they do not create confusion for the public," he said. (rid)