Very risky generosity
Very risky generosity
When this country faced a dire economic crisis under president
Sukarno in the early 1960s, many people said that had the crisis
hit one of our neighbors it would have collapsed.
However, there is no comparing that crisis with today's
economic catastrophe in that our country could collapse if no
workable and conceptional plan is found, and fast.
What makes this crisis worse is the difficulties assaulting us
from so many different directions, which ironically include the
problems caused by the administration itself.
The most dangerous of the present government policies are its
populist measures. Although the exact budget for the policies has
not been made available, surely it reaches trillions of rupiah
since it covers many sectors, including fuel, food and cooking
oil, electricity and education.
It is true that the government has secured an agreement from
the International Monetary Fund (IMF) which allows it to continue
providing subsidies on food, medicines and fuel. But the
situation will become more serious as the years pass.
Fuel consumption rose 4 percent last month despite an increase
in fuel prices by between 25 percent and 71 percent. The
government initially projected its fuel subsidy to reach Rp 9.4
trillion (US$620 million) this fiscal year on the assumption that
the exchange rate would average Rp 6,000 per U.S. dollar. This
means the subsidy rises Rp 5 trillion every time the rupiah's
value falls by Rp 1,000 to the dollar.
The government seems to understand the negative impact of its
generosity, but since its basis is to buy popularity and people's
trust little can be said to stop this. Lack of legitimacy and
public trust has become the blight of the present administration.
The problem has been worsened by the fact that so far the
people have yet to see any impressive economic rehabilitation
plan. Although every thinking citizen understands that the
government cannot do that much, the public did not expected the
condition to deteriorate, or that the authorities' actions would
put the nation at further risk.
What the government is doing now is very dangerous, and its
populist steps could very likely backfire because on one hand
public anger over increasing prices will subside. But on the
other hand it will be a fatal blow to both state oil company
Pertamina and state electricity company PLN. So reallocating
inadequate state funds to subsidize basic needs will heal some
diseases but cause others.
The policies are not only serious, but also fatal. Sri Mulyani
Indrawati, a noted economist, warned last week that if this
continues the economy will deteriorate to such an extent that
within two or three years the country will be in its death
throes.
The government -- like others who have a legitimacy problem --
may be reacting negatively to criticism. And it could continue to
do so until it realizes that the situation has deteriorated so
much that it is beyond salvation.
We sincerely hope that President B. J. Habibie will be wise
enough to lend an ear to the voices of critics, because the first
casualty of his policies will be our nation, which may be too
feeble to shout for help when doomsday comes.