What good can an economic council do?

By Sri-Edi Swasono

JAKARTA (JP): President Abdurrahman Wahid's plan to establish a national economic council not only reflects his awareness of the critical state of our economy, but also indicates his serious intention to overcome the problems.

But it is not only a matter of mere "carrying-over" but also the handling of pending matters that were not addressed by the former government.

Efforts to overcome the economic collapse cannot be adequately handled by the ministries in the economic, financial and industrial sectors only. A national economic council needs to be established in the context of feeding policy formulation to the those ministries.

What would be the council's role in facing the task of solving the country's economic problems?

Before we entertain this question, we must first explain that the council must be an advisory institute with the task to give advice or suggestions to the President on the complex and multidimensional economic problems. As an advisory institute, the council does not play a role at the implementation level. The council will only submit alternative policies and their justification to avoid overlapping of tasks and authority in implementing the policies of the technical ministries.

There are a number of reasons why the council should be established.

First, to give advice to the government on how to immediately activate the real sector. The economy will not necessarily move when the real sector moves. The activation of the real sector must be linked to the urgency of the problems of unemployment and the steep decline of the people's purchasing power so that these problems can be solved as soon as possible. Article 27 of the 1945 Constitution stipulates that this should be made a priority.

Second, the activation of the real sector is not free from the necessity that the banking sector can immediately operate again and win the trust of the community. Therefore, the advisory task of the council is to speed up the implementation of the banking restructuring.

Gradual recapitalization of the banking sector needs to be done immediately in accordance with the urgency and based on the priority of economizing national funds. If necessary, a review must be made of past commitments regarding funds that must be reserved for recapitalization. This review would include, when necessary, the review of the existence of Bank Mandiri and Bank Ekspor which from a strategic and tactical viewpoint left many questions unanswered.

Third, the council perhaps needs to review the policy on the free foreign exchange regime which was one of the main causes of Indonesia's paralyzed economy in the waves of the economic crisis hitting Indonesia. Capital flights and the slowdown of capital inflow are not independent from the free foreign exchange regime which was maintained as a bureaucratic, not academic, vanity of the monetary authorities.

Fourth, Indonesia's economic collapse stemming from monetary crisis into economic crisis before degenerating into total crisis is not free from its heavily import content industrial structure. Many economists intent on the idea of global interdependence, allowed our industrial pattern, maybe without realizing it, to become very dependent on import components which became expensive and unaffordable when foreign exchange rates increased four to five times due to the monetary crisis. Many people do not realize that interdependence, if not closely watched, easily becomes real dependence.

We did not realize either that the country's industry has become an industrial pattern that relies on partial participation in the production process (ongkos jahit). From this fact, the economic plus value we create at home has in fact been carried over in large amounts to foreign countries.

Therefore the council is obliged to consider the restructuring of the national industry, from a position of dependence on foreign countries to a gradual restructuring toward the increase of self-reliance. In other words, we must apply restructuring to our industrial pattern to make better use of natural resources and human resources available in the country.

Fifth, it is a sad truth that Indonesia is trapped in foreign debt. The head and the members of the council must be solid and must have authority to assist the government in lobbying with strong diplomacy to negotiate Indonesia's debt burden. Debt rescheduling and reduction require high credibility from our lobbyists. Only people who are clean and have high moral standards in the council can effectively assist the government to carry out the heavy task.

Emil Salim, Subroto, who wields influence in the Organization of Petroleum Exporting Countries, Frans Seda, Arifin Siregar, Sritua Arief who is now still in Malaysia, Sri Bintang Pamungkas, Sjahrir, Christianto Wibisono, Pande Raja Silalahi and a number of young, brilliant and nationalist people are some who immediately come to mind.

The council will certainly be less than effective if the Cabinet cannot win the hearts of the people. Demands posed by certain quarters as reported in the media these days give cause for concern: party participation, group and religious representation and also solid, authoritative, experienced and clean professionalism.

To accommodate these demands, the streamlining of the ministries is for the moment not an urgent priority. It could give rise to administrative and political problems which require energy and thinking.

For the purpose, a review is perhaps needed to revive the institution of "deputy ministers". Indonesia's best sons and daughters must be mobilized in the greatest possible numbers for prioritizing national interest, not group interest.

The writer is a professor of economics at the University of Indonesia and former chairman of the Indonesian Cooperatives Council.