What good can an economic council do?

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.