We will continue to implement reforms: Soeharto

We will continue to implement reforms: Soeharto

Following is an excerpt of the accountability address
presented by President Soeharto at the opening of the General
Session of the People's Consultative Assembly (MPR) yesterday in
his capacity as Mandatory of the nation's highest institution.

JAKARTA: As a result of past achievements, our people have
numerous new hopes. New opportunities are awaiting us. New
challenges are before us.

These new hopes are higher than the previous ones. These new
opportunities are wider than the previous ones. These new
challenges are more difficult and complicated than the previous
ones.

We live in an era where mankind is preparing to enter the new
century. For the last five years, I often serve a reminder that
we live in the midst of great changes, where sometimes we do not
yet know exactly its essence, its character and its scope. In
fact, we have never imagined them before.

Well aware of such a heavy task, I pay serious attention to
the important message contained in the last sentences of the 1993
Guidelines of State Policy. We are all reminded by them that the
success of our nation's development mainly depends on the
participation of all forces of the nation. This is the reason
that in leading the government, I have continued the deregulation
and debureaucratisation policies which were adopted earlier. The
purpose is to awaken the public initiative and creativity with a
view to building themselves to become strongly self-reliant.

We have materialized our firm determination to continue the
enhancement of a democratic and constitutional life through last
year's general election. The political climate was quite high in
the run-up to the last general election. Part of it was caused by
the fact that some of us were not yet mature enough to put
democracy into practice and misused freedom and openness.

There were also those who wanted to impose their will through
means which actually destroyed the image of democracy and was, in
fact, unlawful. We were concerned and saddened by the victims
who lost their lives. By acknowledging the shortcomings that we
have to address in the future, we were encouraged that nine out
of 10 of those eligible voters have exercised their voting right.
This shows the high degree of political awareness of our people.
The use of our people's voting rights was far higher than in
other countries which have enjoyed hundreds of years of political
tradition.

The appropriate implementation of the dual-function of the
Indonesian Armed Forces (ABRI), which is adjusted to the changes
of time, has given a meaningful contribution to a dynamic
national stability, fresh democratic life, mature political life
and well secured safety of the nation and integrity of the
national territory.

Taking into account the sheer size of the country's area, our
homeland which consists of tens of thousands of big and small
islands and the enormous size of its population, then the number
of personnel and budget allotted to the Armed Forces are very
small. This clearly demonstrates the tradition of the Armed
Forces as fighting soldiers, who give priority to the promotion
of the people's well-being than their own development.

Apart from national stability, a development requires a
conducive regional and global climate. The basic essence of our
independent and active foreign policy is, on the one hand, to
sustain any developments that support the development of nations
and, on the other hand, to prevent the expansion of events that
hamper development. This is the reason why we continue to
consolidate ASEAN. We take an active part in the Non-Aligned
Movement, in the Group of 15, in the D-8, in APEC, in the UN and
in other international organizations.

Until the middle of last year, the general atmosphere at home
and in the region, as well as in the international arena, was
conducive to the smooth implementation and continuation of our
development.

But apparently, 1997 was a year of great concern for us.

Last year, we have suffered from one accident after another on
land, at sea and in the air. Our economic lifeline begun to be
compromised.

We were also subjected to a long drought. Extremely vast areas
of our bushes and forests caught fire. This resulted in the
decline of productivity of crops, particularly foodstuffs and
plantation. In 1997, the production of rice, maize, soybeans,
cassava, sweet potato, peanuts and mung bean was predicted to
decline by around 1.3 to 5.6 percent. This natural disaster
disrupted transportation and the availability of foodstuffs in a
number of regions.

But, we had to go through a much harder trial.

Since the middle of last year, the monetary turmoil has hit us
so unexpectedly.

This region was engulfed in a financial crisis. Then it became
eventually more serious, more wide-spread and more lasting than
anybody could have imagined. And yet our economic fundamentals
were quite strong at that time. As a matter of fact, many experts
believe that the depreciation of our rupiah is absolutely
unreasonable.

The crisis subsequently spread to the East Asian region. A
number of countries outside Asia started to feel its indirect
impact.

The international community realizes that unless it is
resolved properly, it might eventually become a global-scale
crisis.

Steps were taken on the regional and international levels.
But, in the end, the solution depends on the respective
countries.

Our determination is firm to overcome the problems we are now
facing. We shall fight all-out to extricate ourselves from the
crisis.

We are grateful and highly appreciative for the assistance
provided by the international institutions and friendly
countries. All of this has clearly been helpful to our own
endeavors.

However, the burden of responsibility rests precisely on our
own shoulders. It is precisely our own action that determines
whether we succeed or fail in overcoming the present crisis.

We are aware that these are definitely difficult steps. They
may possibly be very difficult and painful.

We must be convinced of our own ability. We must exert all our
potentials to solve the problem we are facing at present. We must
sincerely share the burdens amongst ourselves as fairly as
possible.

In order to resolve this monetary crisis, I have sent a letter
to the Managing Director of the International Monetary Fund (IMF)
on Jan. 15, 1998, accompanied with an economic and financial
reforms and restructuring program. This program has the support
of the IMF. Financial assistance is also coming from the World
Bank, the Asia Development Bank and a number of other countries.

The main objective of our economic and financial reforms and
restructuring program is to restore confidence in our currency,
in our financial institutions and in the future of our economy.

It is extremely important to restore confidence.

It is precisely the loss of confidence that becomes the
primary cause of the numerous difficult problems we are
confronting today. The serious implementation of this program
will hopefully restore the confidence of economic players at home
and abroad.

In order to ensure the best possible implementation of the
program, I have established the Council for the Consolidation of
Economic and Financial Resilience, which I chair myself.

In accordance with the set schedule, we have carried out parts
of the programs while the other parts will follow later.

We are firmly committed to implement this program in its
entirety.

The immediate measure we have adopted was the revision of the
1998-1999 draft state budget, which has now been approved by the
House of Representatives. The next step will be the
rehabilitation of the banking sector with a view to rebuilding a
sound banking system. This program covers two essential elements.
First, a full guarantee provided by the government to all
depositors and creditors of national public banks. Second, the
establishment of a National Banking Restructuring Agency, which
is responsible for the rehabilitation of the existing ailing
banks and whose recovery prospect is dim.

A few days ago, I have approved the merger of four state-owned
banks, namely: Bank Dagang Negara, Bank Bumi Daya, Bank
Pembangunan Indonesia and Bank Expor Impor Indonesia. The new
name for these merged banks is Bank Catur. To restore the health
and enhance the competitiveness of the private banks, the
government has set the minimum capital requirement and encouraged
them to merge.

The other important measures were to ensure unhindered foreign
and domestic trade, to facilitate investment, to remove
monopolies and abolish special privileges granted to the national
automobile project and the Nusantara Aircraft Industry.

Despite the fact that we already have, and started to carry
out, clear and fundamental reforms and restructuring program,
there are no signs yet that the situation has improved. On the
contrary, the people's life is becoming more difficult.

As a whole, the exchange rate of our rupiah continues to be
weak. It strengthens a while and then weakens again. During these
last few days, the exchange rate of US$1 hovers around Rp 9,000
to Rp 10,000. As a consequence, corporations face serious
difficulty and reduce their activities. The danger of
unemployment starts to emerge. The price of imported goods, or
locally-produced goods with high-import content, has become very
expensive, including that of medicine. The price of daily
necessities has also been pushed higher.

I share the sadness of housewives and low-income families in
dealing with the skyrocketing prices. The public becomes
restless. Even the slightest misunderstanding has sparked a
greater unrest. The situation becomes even worse when there are
individuals who fish in the muddy water.

Our economic condition becomes worse, because our L/Cs are not
accepted by banks abroad.

Our economic plight attracted the attention of a number of
heads of government of other countries. They came to see me.
Others called me on the phone. They expressed their views on what
they consider as a good solution to resolve our problem. They
have also extended their helping hands. We are highly
appreciative for all this.

I shall not hesitate to do whatever possible to overcome the
situation in order to alleviate the increasingly heavy burden of
the people's life.

I have started, and will continue, to implement the economic
and financial reforms and restructuring programs which have the
support of IMF.

However, there are no signs of improvement yet.

The key to the problem is the stabilization of the exchange
rate of our rupiah at a reasonable level. Unless this is
achieved, I do not see any possible improvement within the short
period of time.

This is the reason why I have asked the IMF and other heads of
government to assist us find a more appropriate alternative.

I refer to the more appropriate concept as an IMF-Plus.

I myself am carefully and cautiously contemplating the
possible adoption of the Currency Board System.

Whatever measure we shall take, we need the support of the IMF
as the authoritative and highly reputed international financial
institution.

Undoubtedly, in the end, our fate rests in our own hands.

The efforts to find the best possible solution have become the
topic of discussion by the general public. With good intention, I
value positively these discussions. This is a dynamic part of our
democratic process. It reflects a sense of belonging, a sense of
sharing the common future. I have been following all the views
expressed with great interest. I appeal to all of us for not
exaggerating the differences of opinion, especially those that
confuse further the common people. Differences of opinion should
not become the seeds of dissension among us. Even more so, when
we now need the strongest possible unity among ourselves to
weather safely together from the current storm.

In order to overcome the situation, we have taken various
economic restoration measures. Some of them are short-term and
others are of a longer term.

The short-term measure covers the adequate provision of food
and medicine, as well as employment opportunities for those who
have lost their jobs. For the longer term, we are formulating
economic and financial reforms and restructuring programs, as I
have mentioned above.

To meet the food demand, we reduce the post-harvest waste,
improve the intensification quality, expand crops area through
the use of idle farmland, enhance the use of irrigated and ebb-
tide lands, and also utilize industrial forest area for cash-
crops.

The effort to raise production covers 2.3 million hectares of
paddy field, 540,000 hectares of maize, 527,000 hectares of
soybeans and 14,000 hectares of cassava. We shall continue this
effort and expand it with a view to consolidating food security.
While waiting for this effort to produce result, we import
essential foodstuffs to meet demand and maintain price stability.

Another extremely important demand of the people is medicine.
Although we have been producing various kinds of medicine, most
of the raw materials are still imported. The exchange rate
fluctuation causes shortages of medicine supply and the price
continues to rise. This situation may lower the public health
standard. To meet the demand for medicine, its importation is
being accelerated and its production resumed.

To facilitate its distribution, to provide certainty and to
maintain a stable and reasonable price, the government provides
subsidies to imported food and medicine. These subsidies are
covered by the state budget.

We are overcoming the problem of unemployment through the
labor-intensive project. This project creates productive
employment opportunities to seasonal and unskilled laborers, both
in the rural and urban areas. It covers the rehabilitation or
construction of rural and village roads, irrigation networks,
provision of clean water, regreening and reforestation, as well
as other productive undertakings, according to the situation and
need of the local community.

Employment opportunities are further prioritized for the
development of food production and agro industry. The economic
activities in this agricultural sector practically are not
affected by the currency exchange rate fluctuation, because they
rely on our abundant resources.

Furthermore, the nature of these activities is labor-
intensive. We are also developing a program to absorb skilled
workers, especially in the urban area. The emphasis will be on
entrepreneurship, because companies may not be able to expand
employment opportunities immediately. In fact, these companies
may probably be unable to quickly reemploy the same number of
workers who have been laid off.

We continue to follow, study, improve and reinforce these
various activities, so that the result will quickly be enjoyed.

We must restore our economic and monetary condition. We must
reawaken our economic resilience. This is an awfully difficult
task.

However, we are not discouraged. We have the power, experience
and determination. To date, we have built the infrastructure and
human resources, as our assets to stand upright again and
continue with development.

Only one year is left to complete Repelita VI. But we have
exceeded many of the final targets for Repelita VI. Certainly,
there are still some which have not yet been reached.

During the last years of Repelita V and the first year of
Repelita VI, our economic growth was so high that it was
necessary to revise the target of economic growth to an average
of 7.1 percent per year. The estimated total investment and its
financial resources also had to be adjusted.

The implementation of development in Repelita VI continues to
be based on the Trilogy of Development. This means that we have
to correctly combine stability, growth and equitable
distribution.

Efforts to create an economic stability are made through,
among other things, the control of the inflation and current
account deficit.

The inflation rate is expected to improve from 8.6 percent to
go down to 5 percent by the end of Repelita VI. Whereas the
current account deficit will be 1.9 percent by the end of
Repelita VI, compared to 1.8 percent at the end of Repelita V.
Meanwhile, one of the important targets of equitable distribution
is reducing the number of the poor to around 6 percent of the
total population.

Until the third year of Repelita VI, our national economy has
shown a steady growth as expected. the economic growth rates
during the 1993-1996 period were 7.3 percent, 7.5 percent, 8.2
percent and 8 percent respectively.

However, during the second half of 1997, the monetary turmoil
struck unexpectedly.

Our economic growth then slowed down. The provisional figure
of the economic growth in 1997 was just 4.7 percent. Whereas, in
fact, during the four years of Repelita VI, it reached an average
of 7.1 percent annually, which means that it was the same as the
revised annual target for Repelita VI.

Such an economic growth was sustained by the increase of
direct investment as the essential motor of economic development.
Taking into account to the whole value of the approved
investments during Repelita V, the approved domestic investment
rose one and a half time and foreign investment rose three times
during the four years of Repelita VI.

The population growth rate continued to be lowered, so as to
reach 1.54 percent in 1997. This figure is close to the final
target for Repelita VI, which stands at 1.51 percent.

With such economic and population growth rates, Indonesia's
per-capita income has risen. In rupiah denomination, the value
rose from Rp 2.7 million in 1996 to Rp 3.1 million in 1997. thus,
the real per-capita income in rupiah denomination in 1997 has
surpassed the target set for the fourth year of Repelita VI,
which stood at Rp 3 million per-capita.

In U.S. dollar denomination, the per capita income in 1993 was
$842, and it rose to $1,155 in 1996, which means it exceeded the
target of $1,118. However, because of the depreciation of the
rupiah, the per-capita income in 1997 dropped further to $1,089.

The adequately high economic growth until the third year of
Repelita VI was also followed by a controlled internal stability.
During that period, the inflation rates were 8.6 percent, 8.9
percent and 5.2 percent respectively, which was close to the
final target Repelita VI of 5 percent.

As I mentioned earlier, since the middle of 1997, the prices
of essential commodities have risen. This trend started in
September last year, with an inflation rate of 1.3 percent. It
remained high until January 1998 that reached 6.9 percent. The
inflation rate for the entire 1997 became 11.1 percent, and
during the first 10 months of the 1997-1998 fiscal year, it
reached 16 percent. This price increase was also spurred by the
long drought, that led to the decline of agricultural production
and price increases of food stuffs.

As far as the external stability is concerned, the export
growth since 1993-1994 was generally slower than import. The
export rate which was not too high was due to the fiercer
competition, especially an increasingly great number of products
of labor intensive industries were started to be produced by new
exporting countries; and also due to the increased demand at
home. On the other hand, continued intense economic activities --
including investment-- have boosted the import growth rate.

This trend led to the continued increase of the current
account deficit, from $2.9 billion in 1993-1994 or 2.1 percent of
the GNP, to $8.1 billion in 1996-1997 or 3.5 percent of the GNP.
However, the significant rupiah depreciation in the middle of
1997-1998, has weakened import. At the same time, export has
risen, especially of products which have little import-
components. As a result, the current account deficit has
improved, almost half of the previous year's figure, that is $4.3
billion or 2.2 percent of the GNP. This figure comes even closer
to the target set for the final year of Repelita VI, namely 1.9
percent of the GNP.

Meanwhile, the entire Indonesia's debt stock which amounted to
$83.3 billion by the end of March 1994, has risen to $101.3
billion by the end of March 1995, and then it went up again to
the tune of $136.1 billion by the end of December 1997.

The public debt has declined from $55 billion by the end of
March 1994 to $54.1 billion by the end of December 1997, or a
drop form 66.1 percent to 39.8 percent of the total debt.

On the contrary, the private debt has gone up from $28.3
billion to $82 billion, or an increase from 33.9 percent to 60.2
percent of the total debt.

Furthermore, the Debt Service Ratio (DSR) of the private
sector rose from 12.8 percent in 1993-1994 to 27.4 percent in
1997-1998. Conversely, the public sectors DSR dropped from 19.1
percent in 1993-1994 to 11.8 percent in 1997-1998. As a whole,
the public and private DSR have risen from 31.9 percent in 1993-
1994 to 39.2 percent in 1997-1998.

With the increased private debt servicing during the final
years of Repelita VI, it would be difficult to reach the target
of the overall DSR of 24 percent by the end of Repelita VI.

Our external debt servicing burden is really heavy. But the
government has enough funds and foreign exchange to honor its
obligations.

Indeed, we are now facing a very serious economic hardship.
But we are confident that by working hard and implementing the
programs we have formulated, we will definitely be able to
overcome these difficulties.

I must reaffirm that the Indonesian government is committed to
honor all its external debt obligations on time.

The macroeconomic indicator I just mentioned is indeed
important to determine whether we have made progress or suffered
a setback in the implementation of development.

However, no less important is whether the level of prosperity
of our people is improving or, on the contrary, deteriorating.

One of the essential indicators of the people's prosperity is
the number of poor people. The condition of our society today is
as follows. In 1970, there were 70 million poor people among us
or around 60 percent of the whole population were poor. The
number of poor people has declined to 27.2 million or 15.1
percent in 1990. Then, it went down further to 25.9 million or
13.7 percent in 1993.

Since the start of Repelita VI, additional efforts were made
especially for the poor segment of the population. The primary
poverty alleviation program is the Inpres for the least developed
villages. The result has been quite encouraging. In 1996, the
number of poor people has declined to 22.5 million or around 11.3
percent. This means that in three years, there was a drop in the
number of poor people by 3.4 million people, or a decline of 2.3
percent.

The poverty alleviation program is a part of the national
campaign to help the weak, which is motivated by the spirit of
togetherness, tolerance and solidarity. In this connection, this
program is expanded with the Takesra/Kukesra programs, to
mobilize funds from the better-off members of society.

Only in one and a half year, almost all 10.7 million Pre-
Prosperous and Prosperous-I families were successfully encouraged
to save. In the meantime, 10.5 million families have already
obtained business credits (Kukesra). The joint business group
(Kube) which was established through the Social Welfare Program
has also expanded its business, increased its income and
heightened its social solidarity.

Business promotion for the poor people in the least-developed
villages is encouraged further by the opening of local markets
through the Supplementary Food for School Children Program (PMT-
AS) that absorbs the products of the rural community. The
isolated least-developed villages have also started to establish
relations with the wider public by the development of
infrastructure in the least-developed villages. This development
simultaneously creates new jobs and technological transfer for
the least developed community members.

Closely related to the welfare improvement efforts and poverty
alleviation is the creation of employment opportunities. In line
with the adequately high economic growth during the 1993-1996
period, the increased number of work force was accompanied by
expanded employment opportunities. The work force has increased
from 81 million people in 1993 to 88.2 million people in 1996, or
an increase of 7.2 million people.

At the same time, the number of workers rose from 77 million
people to 83.9 million, or an increase of 6.9 million people. The
most encouraging is the enhancement of our manpower and this also
has an impact on higher productivity.

Meanwhile, the well-being of workers is improved by the
setting of regional minimum wages. In 1997, the minimum wages had
reached 95.3 percent of the minimum physical need. The
improvement of the workers' well-being is also carried out
through the adoption of the social security system for workers.

Another yardstick of the improvement of the people's well-
being is the availability of energy and protein, which in 1996
was 3,208 kilo-calories and 73.1 grams protein. This means that
we have surpassed the suggested level of sufficiency set in
Repelita VI, that is 2,500 kilo-calories and 55 grams protein
per-capita/day. Also the energy consumption today is nearing the
figure suggested in Repelita VI, whereas protein consumption has
exceeded it. The nutrition condition of the public has also
improved.

The improved public health is also evidenced by the following
facts. The infant mortality rate had declined from 58 in the 1993
to 52 per 1,000 births in 1997. This figure is close to the final
target for Repelita VI, that is 50 per 1,000 births.

Furthermore, the maternal mortality rate dropped from 452 in
1993 to 390 per 100,000 births in 1994. The gross mortality rate
had gone down from 7.9 in 1993 to 7.5 per 1,000 inhabitants in
1997, which means that it reached the final target for Repelita
VI. At the same time, the life expectancy had also improved from
62.7 years in 1993 to 64.2 years in 1997, as it comes close to
the ultimate target for Repelita VI, that is 64.6 years.

To continue the improvement of the public health standard, an
information campaign on nutrition for the rural community all
over the integrated services posts (Posyandu) was conducted,
covering around 257,000 integrated posts.

With a view to improving wider and equitably distributed
health services to the public, public health center and hospital
networks were established since the First 25-Year Long-Term
Development program. In 1997-1998 we have 7,106 public health
centers and 1,890 hospitals spread evenly all over the country.
The improvement of health services is sustained by an
increasingly great number of medical personnel and they are more
evenly dispersed, consisting of tens of thousands of doctors,
62,000 traditional midwives and other para-medics.

The development of health and family welfare is closely linked
to family planning services. Until 1997-1998, the total number of
active family planning participants has reached around 26.8
million child-bearing couples. This number surpassed the target
for Repelita VI, that is 26.2 million couples. This is the reason
why we succeeded in controlling the population growth.

The improvement of the people's well-being must clearly be
accompanied by the provision of houses. The number of simple and
very simple houses that were constructed has reached more than
550,000, this means that it passed the target for Repelita VI of
500,000 houses.

In addition, development is being continued for a greater
number of drainages, waste disposal, waste water treatment and
clean water facilities that cover hundreds of cities. Also a
greater number of villages is supplied with clean water. These
efforts mean the improvement of the extremely important
environment.

Another major achievement is in the field of education.
Entering the Second 25-Year Long-Term Development program, the
Six-Year Elementary Compulsory Education was extended to a Nine-
Year Elementary Compulsory Education. This is a very important
step for laying a solid foundation of qualified human resources
development for the subsequent stages of development.

In Repelita VI, the opportunity to obtain education has been
expanded. The quality of education has improved in all
disciplines, types and levels. The link between education and the
business world and the need for employment is becoming more
evident.

In brief, the people's well-being as a whole is improving.
This was made possible because we have made significant progress
in the development of other economic areas.

The industrial development has consolidated the national
economic structure. The linkages with other sectors become closer
and it has expanded employment and business opportunities. The
growth of the industrial sector has stimulated activities in
other development sectors.

In Repelita VI, various industries have developed, such as
industries that produce goods to meet domestic demands and
people's life, export-oriented industries, industries that use
national resources, industries that have strategic values and
affect on the development of other industries and industries that
promote economic activities in areas outside Java.

Based on constant prices of 1993, during the four years
implementation of Repelita VI the processing industries have
grown with an average rate of around 10.3 percent annually,
whereas the non-oil/gas processing industries grew by about 11.4
percent per year. This growth rate surpassed the target of the
annual average growth set for Repelita VI, that is 10.2 percent
for processing industries and 11.3 percent for non-oil/gas
processing industries.

The industrialization process has changed the national
economic structure: from a greater emphasis on agriculture to
industry. In 1993, the share of industrial sector in the Gross
National Product (GNP) was 22.5 percent. In 1996, its share rose
to 25.5 percent. This figure is close to the goal set for
Repelita VI, that is 25.9 percent.

Until 1996, the industrial sector had absorbed 2.3 million
manpower. The small industry absorbs the most manpower. Our
industries produced a greater quantity of goods, which are more
diversified and of increasingly high quality.

The export of goods from non-oil/gas processing industries
tend to increase. In 1993, its export value reached $23.3
billion. In 1997, it was predicted that it would reach over $34
billion. In 1997. the share of export of non-oil/gas processing
industries in the overall national export has reached around 65
percent.

The growth of export of industrial goods was mainly due to the
relatively substantial increase of primary commodities, such as
textile, processed timber, leather wear and shoes and footwear,
steel, machinery and automotive, electronics, processed rubber
products, basic chemical products, gold, silver and other
precious metals.

The small industry plays an increasingly important role in the
expansion of business and working opportunities, in rural
economic development, in poverty alleviation and even in export.
During the 1993-1996 period, the export of small industry has
risen to an average of around 4.4 percent. In 1996, its export
value reached $2.5 billion.

Although the role of the industrial sector assumes greater
importance, this does not mean that the agricultural sector is
unimportant. On the contrary, the national development will
continue to rely on agriculture. What is needed is to raise its
productivity and added-value.

The agricultural production had increased and the added-value
of agricultural commodities had also risen. Between 1993-1996,
the GNP of the agricultural sector grew by an average of 2.9
percent annually.

This is still lower that the target set for Repelita VI of 3.3
percent. However, during these years the growth of fishery
reached 5.1 percent, plantation 4.7 percent, stock-raising 4
percent and food crops reached 1.6 percent. The growth of the
fishery sector came close to the target for Repelita VI, i.e. 5.2
percent, The growth of plantation has surpassed the target for
Repelita VI of 4.2 percent. The growth of food crops was lower
than the target set for Repelita VI of 2.5 percent, due to the
prolonged drought in 1994 and again in 1997. These developments
show that fishery and plantation became the new sources of growth
of the agricultural sector.

During Repelita VI, the number of manpower absorbed in the
agricultural sector tended to decline. In 1993, the agricultural
sector absorbed around 40.1 million people or 50.6 percent of the
number of manpower. In 1996, the number dropped to 37.7 million
people or 44 percent of the total manpower.

However, at the same time the productivity of manpower in the
agricultural sector had risen from Rp 1.5 million per person in
1993 to Rp 1.7 million per person in 1996 or an average increase
of 4.9 percent annually. The higher productivity of manpower in
agriculture has exceeded the target for Repelita VI of 2.4
percent.

The decline in the number of manpower in the agricultural
sector and the higher productivity of manpower in the
agricultural sector, which were accompanied by the increase in
the absorption of manpower in the industrial and service sectors,
showed the changing process of the national economic structure.
The change of the structure is good and it has the right
direction.

The growth of the agricultural sector cannot be separated from
the development of irrigation infrastructure. The irrigation
development had expanded the irrigated paddy field area from 5.5
million hectares at the end of Repelita V to 5.9 million hectares
in the fourth year of Repelita VI. The final target for Repelita
VI is 6.3 million hectares.

In order to maintain food self-sufficiency, new irrigation
network was built and paddy fields created, totaling 161,000
hectares and they are located outside Java. To overcome the
impact of the drought and, simultaneously, sustain the higher
income of the rural population, the irrigation network in the
rural area was rehabilitated, covering 1.4 million hectares
during Repelita VI. Furthermore, the swampy area network was
expanded, as well as the development of the peat area as a new
production field in Central Kalimantan.

The progress in the development of water works and irrigation
is closely linked to activities in the forestry sector,
especially in the provision of sustainable water resources and
the control of erosion and sedimentation. Until the fourth year
of Repelita VI, a total of 2.6 million hectares of destroyed
forests and critical forest areas were rehabilitated.

The development of industrial forests covers an area of 1.2
million hectares or around 94 percent of the final target set for
Repelita VI. The development of small-holder forests covers an
area of 474.400 hectares, well over the final target for Repelita
VI of 250,000 hectares.

The development of land transportation is expected to reach
the target for Repelita VI. Most of the development of land
transportation is a road infrastructure development program.

The river and lake transportation, as well as crossings, is
improving by the increased number of berths and ferry-boats. The
river and lake transportation is very important as a
transportation means in the hinterland and isolated areas.

Significant progress was also achieved in the development of
sea and air transportation.

Meanwhile, the mining sector grew by an average of 6 percent
every year during the four years of Repelita VI. This growth is
higher than the target set for Repelita VI, namely an average of
4 percent annually. A striking increase of the coal production
was recorded, both to meet domestic and export demands.

The production rose from 28.6 million tons at the end of
Repelita V to 54 million tons in 1997-'98. This increase has
raised Indonesia's position as the third largest coal-producer in
the Asia-Pacific region and the third largest exporter in the
world. The coal export during the fourth year of Repelita VI,
which stood at 39.3 million tons, has passed the final target for
Repelita VI of 39.1 million tons.

The production and export of other minerals generally were on
the rise, although the price in the international market has not
always been favorable.

The oil and gas production was maintained, in line with the
target for Repelita VI. Apart from the discovery of new oil
fields, it was also attributed to the use of advanced technology
such as enhanced oil recovery.

In Repelita VI, we tried to reduce the share of oil in the
provision of energy and to increase the non-oil share. The target
of the share of oil for primary energy provision in 1997-'98 was
53.2 percent. This target has already been reached because in
that year the share of oil dropped to 53.1 percent.

The development of power generation is expected to meet the
need for an economic growth. The need for electricity in the
rural area is supported by the use of micro-hydro and solar
energy.

One of the main sectors of the national economy is tourism.
The growth of tourism was evidenced by the increased foreign
exchange earnings and the number of foreign tourists.
Furthermore, during the last four years, tourism activities have
opened almost 700,000 new jobs.

Rapid progress was also made in post and telecommunications,
which made a significant contribution to the progress of
development in other sectors.

The intensified development in all sectors requires the
mastery and application of science and technology, especially in
the run-up to the globalization era and the increasingly fierce
competition. The development of science and technology needs an
enormous investment. Therefore, we are doing it in accordance
with the funding resources.

The mastery of science and technology has made a very
substantial progress, as demonstrated by the ability of
Indonesia's men and women to design and produce on their own a
sophisticated aircraft in its class, namely CN-250.

We must carry out equitable distribution as an important
aspect of our development.

Therefore, development policy and impetus must take seriously
into account the regional economic growth. During the first three
years of Repelita VI, the average rural development performance
for all provinces has reached the target for Repelita VI. The
provinces in the eastern part of Indonesia have apparently grown
faster than those in the west. Furthermore, the decline in the
number of the poor was also more meaningful compared to the
western part.

In the meantime, the transmigration program in Repelita VI
made an important contribution to the distribution of population,
poverty alleviation, equitable to the distribution of intra-
regional development and community integration.

To create equitable distribution, especially to carry out the
mandate of Article 33 of the 1945 Constitution, the role of
cooperatives becomes increasingly important as the people's
business and economic forum.

Its business scope expands to various production sectors and
services, particularly in the savings and loan business. In the
rural areas, cooperatives have grown into the community's main
economic institution.

Until the fourth year of Repelita VI, more than 52,000
cooperatives were established, with a total business value
amounting to Rp 13.6 trillion and with a membership of over 28
million people. Among others, more than 12,000 cooperatives of
have developed into self-supporting cooperatives. Around 4,700
cooperatives --including a number of savings and loan
cooperatives -- have become medium and big business enterprise,
with a business value exceeding Rp 1 billion annually.

It is impossible that development does not bring about
progress, unless it is sustained by an adequate state apparatus.
With all its shortcomings, our state apparatus has certainly made
improvement in planning, operation and supervision of general
government duties as well as development tasks.

Thus, the overall implementation of the Presidential duties
during the past five years, which were entrusted in me by the
Assembly. It includes the implementation of development as
mandated by the 1993 Guidelines of State Policy. The complete and
detailed accountability report on the implementation of
development is included in the big book, as an annex to this
accountability report.

Until the middle of last year, everything has proceeded
normally. Our development went on unhindered. A number of targets
for Repelita VI were attained. In fact, we have even surpassed
some of them.

Since the second half of last year, the monetary turmoil
struck. It seems that everything what we have built with great
difficulty, sometimes, with pain and sacrifices, was all of a
sudden undermined. Not that we did not know it would have in fact
happened.

In the past, I have repeatedly said that whether we want it or
not, whether we like it or not, whether we are ready or not, we
would definitely feel the impact of the unifying world economy.
This impact has come sooner than we had anticipated. The adverse
impact is much more serious than what we had imagined.

Apparently our economic resilience was not strong enough to
withstand such external blow. Moreover, apart from external
influences, some of the hardship we are suffering today is also
due to our internal weakness.

We do not have to look for a scapegoat. It is also useless to
look for a scapegoat.

It is far more useful for us to conduct introspection. We may
find a blessing in disguise from this hardship.

With a full awareness, we must have the courage to acknowledge
our own weaknesses and shortcomings. We look for strength from
this weakness.