What RI should do to ease crisis
What RI should do to ease crisis
JAKARTA (JP): A quarter of Indonesia's 210 million people now
live in absolute poverty, and a further quarter of the population
is vulnerable to poverty, according to the World Bank.
"The government must design policies for economic
restructuring in tandem with policies for poverty alleviation,"
Shafiq Dhanani, a consultant at the Jakarta office of the
International Labor Organization (ILO), said in a recent
interview.
Dhanani acknowledged that to accomplish this, the government
would have to overcome the difficult dual task of coping with the
immediate economic hardships of reduced real incomes, and
supporting employment and income growth in the medium term.
He proposed a number of measures the government could take to
ease a crisis that preys mostly on the poor:
* In the short term, the government should continue to protect
the poor by controlling and stabilizing the price of rice and
other basic commodities, and perhaps through the continuation of
social safety net programs, including the rice subsidy program
and the provision of basic educational scholarships and health
services.
* Also in the short term, resources should be allocated to
undertake public works programs to provide employment. The focus
should be on rehabilitating existing infrastructure (schools,
health centers, roads) and creating new rural infrastructure
(ports, telecommunications facilities, railways, roads).
* Provide support to the informal sector, such as the
provision of power, water and transportation infrastructure to
set up businesses, coupled with reduced bureaucratic barriers to
informal sector activities.
* In the medium term, the strengthening of three sectors in
particular can generate economic growth and large numbers of
employment opportunities: small-scale agriculture, construction
and manufacturing.
* A renewed emphasis on the agricultural sector, which was
rather neglected before the crisis, is urgently required for two
reasons. First, agricultural growth affects poverty levels in
rural areas more directly than any other sector. This is
particularly true outside of Java, where off-farm employment
opportunities are scarce.
Second, food production will stabilize food prices, control
inflation and also save foreign exchange. The emphasis should be
on agricultural technology and help for small-scale farmers in
support of high value crops (food and estate crops), rather than
on estate plantations as in the past.
* Growth in the construction sector can be spurred by public
investment in rural infrastructure to support agriculture and the
rest of the rural economy.
* The manufacturing sector has not been able to take advantage
of the devaluation of the rupiah and lower labor costs because of
its continued dependence on imported materials, components and
parts. The sector urgently needs to implement a medium-term
program to build manufacturing capability; i.e. to improve the
technological, organizational and managerial capacity of domestic
manufacturers to produce components and parts that can
successfully compete against similar products from abroad. (swe)