Various factors may affect economic development

Various factors may affect economic development

JAKARTA (JP): The recent banking scandal, leveling-off of non-
oil exports, declines in foreign investment, slow depreciation of
the rupiah, low oil prices and the increase in U.S. interest
rates are likely to affect Indonesia's economic development, an
analyst says.

"Indonesia, therefore, should take strategic measures to
overcome these problems," Rizal Ramli, the managing director of
Econit, said yesterday during a discussion on developments in the
macroeconomic climate.

Econit is an independent advisory group on economics, industry
and trade.

He said many foreign parties have become jittery over the
performance of Indonesia's economy and its ability to achieve the
government's development targets.

"Although some of the factors causing this apprehension cannot
be explained economically, such as those related to the country's
political situation, most of them are a result of economic
forces," he said.

The case of Bank Pembangunan Indonesia (Bapindo) -- which
involves a bad loan of US$620 and accusations of official
corruption -- has hurt the image of the country's banking system
in the eyes of the international world.

"There is no need to argue about the poor rating that an
international rating company has given to our banks. What is
needed now is a concrete plan of action to correct our mistakes,"
he said of the recent Standard & Poors assessment that
Indonesia's banking industry is in financial stress.

Disclosure

Director of Econit Laksamana Sukardi said more banking
disclosure is needed to prevent such cases from happening again.

He explained that disclosure does not necessarily mean a
violation of banking secrecy, which has been designed for the
benefit of the public and the bank's clients, "not as a shield
for certain people to hide behind," he said.

According to Laksamana, the point in making a banking
disclosure was to balance it with the bank's secrecy. He believes
the current situation is imbalanced, with more secrecy than
disclosure.

He said disclosure could reveal the concentration of a bank's
portfolio and its fields of business, its creditors who were at
or approaching the legal lending limit, the percentage of
creditors from small, medium and large-scale businesses and big
acquisitions made by the bank's clients.

He also suggested that a higher minimum capital be stipulated
for the establishment of a bank. The current stipulation is Rp 50
billion ($23.36 million), as compared to $400 million in Taiwan.

Rizal said that in the other sectors, the government has yet
to establish clear plans to meet the new global trade era
following the conclusion of the Final Act of the General
Agreement on Tariffs and Trade.

"An increase of about 15.4 percent or $116 billion in world
trade will go to Asian countries outside Japan as a consequence
of the GATT. Without pro-active steps to increase non-oil
exports, we will never gain the benefit of the new trade
agreement," he said.

Rizal also suggested that deregulation is needed to reduce
high business costs. (10)