What do analysts, business say about government's post-IMF program?

What do analysts, business say about government's post-IMF program?

The White Paper on the government's post-IMF program, which sets out the guidelines to be followed by the government in its bid to secure the recovery of the country's economy once the existing IMF bailout program ends later this year, draws praise and concern from analysts and businesspeople. The following are the comments compiled by The Jakarta Post's Fitri Wulandari.

Fauzi Ichsan, chief economist of Standard Chartered Bank Indonesia

In general, the programs in the White Paper are market- friendly. They can certainly boost the confidence of international donors and investors.

I think the markets, the International Monetary Fund (IMF) and other international donors are very happy at the programs.

However, in my view, the programs are too broad and ambitious in comparison with the IMF letters of intent (LoIs). They cover everything from electricity to transportation to monetary affairs. The LoIs were more focused on and limited to specific issues.

In addition, it lacks a real action plan. Many programs are focused on creating rules of the game but not addressing actual problems.

With such broad programs, it will be difficult for the government to carry them out. The government found it hard to implement even the IMF program, which was more simple than the White Paper. It will be more difficult to implement the programs in view of the tight schedule and the general election next year, on which all attention will be focused.

There are two points that concern market players.

First, the programs lack a disciplinary mechanism. Under the IMF LOIs, if the government failed to carry out a program, the IMF would apply sanctions or penalties, such as delaying the disbursement of loan tranches.

In the White Paper, however, there is no disciplinary measure to be applied if the government fails to implement programs.

For investors, there is no guarantee that the programs will be carried out as scheduled. Who knows, the government might drag its feet in implementing the programs.

Another matter of concern is the lack of real action with regard to politically sensitive issues such as legal action against uncooperative debtors.

Such debtors contributed to the economic crisis that pushed the banking industry toward bankruptcy. But the programs did not say if the debtors were going to be tried. The market is very concerned because this lies at the very core of legal uncertainties and the government has still to address it.

Anton Gunawan, chief economist of Citibank Group Indonesia

The market is not that anxious anymore about the White Paper, as its publication was delayed for a month. So, when it was finally published, the market responded rather coolly.

Some of the programs, particularly those relating to macroeconomic sustainability and financial restructuring, are worthy of praise. They are very good and have a clear concept and target. They are very detailed, too.

It is important to maintain continuity of macroeconomic stability.

However, many programs, which are aimed at improving investment, exports and creating employment, are very bad and have no clear direction or target. These are programs for the real sector, which are very important for businesses.

I don't know if the government is serious in addressing the problems in investment, trade and manpower.

For example, the programs say that in order to improve trade, the government will draft a trade law. But what is a trade law? What is the purpose of the law? What is the government trying to achieve with the law?.

On manpower, the program says the government will issue a decree for certified training. That would be just rules of the game. It does not have a policy that aims to create a system to improve productivity.

Low productivity is the reason why we cannot compete.

The manpower programs do not answer the issue of how to create industrial relations that are mutually beneficial for employers and workers.

Businesspeople will wish to see an workable program rather than a set of guidelines.

Sofjan Wanandi, chairman of the Association of Indonesian Employers Apindo)

Businesspeople generally welcome programs on macroeconomic stability and financial restructuring.

But we are very skeptical about the program to improve investment, exports and manpower. The programs say the government will set up a center for trade and investment, reform the tax regime and so on. This is nothing new.

The programs lack clear targets. We want to see by how much investment and exports will be increased and to what extent the workforce can be absorbed by the market.

If there are clear targets for inflation, exchange rate and growth, why there are no targets for the real sector?.

Businesspeople are very concerned at these issues because without clear targets, we doubt the government will make an all- out attempt to achieve them, particularly in view of the general election next year, which will predictably divert the government's attention.

There are many issues, such as labor, taxes and smuggling, that have yet to be addressed by the government. Thus, we are very skeptical that there will be significant improvement.

Another issue is the government's plans to produce new legislation and revise the existing to improve the investment and business climate. But the question is, can the government push the House of Representatives to do its homework and complete its deliberations of legislation needed by business?

In reality much draft legislation or revisions to it are now in limbo because legislators have not done their jobs properly.

The last issue is the disciplinary mechanism. The government will establish a program to monitor implementation of the White Paper, but it is impossible for the government to punish itself in the event of failure to implement the programs.

Therefore, we are going to establish a monitoring team from the private sector, which will comprise economists, representatives from foreign chambers of commerce and industry and individual businesspeople.

Indra Ibrahim, executive director of the Indonesian Textile Association (API)

The White Paper is only a statement or a declaration. It needs to be followed up by real action. Businesspeople await genuine action from the government.

We hope the policy can help attract investors back to Indonesia, particularly within the textile industry. It is estimated that the industry needs new investment of US$4 billion to $5 billion to replace old machinery with new.

Without new investment, it is impossible for the textile industry to compete with other countries, as the market prefers cheaper, good-quality products.

Indonesia faces a tough challenge in surviving the liberalization of the textile industry, effective in 2005. The country's low competitiveness very much affects the low level of investment.

I hope the White Paper will raise investor confidence in the country.