World Bank report
The World Bank's annual report on Indonesia's economy, which previously had always been kept confidential, was introduced last week to the mass media, only hours after copies were given to members of the Consultative Group for Indonesia, the country's consortium of creditors.
That the report was made available to the public does not, however, mean that its analysis of Indonesia's economy and government policies had been toned down so as not to embarrass the government. Instead, the report remains consistently critical, yet objective in its analysis, giving credit where due, bluntly citing any mistakes or policy inconsistency and prescribing policy recommendations. It appears the decision to make the report public was based partly on the World Bank's 1994 information guidelines that all economic and sector reports received by the bank's directors be made available to the public, and partly due to the mature relationship between the bank and the government.
The latest annual report, which will be discussed at the next annual meeting of the Consultative Group for Indonesia in Paris next month, follows the format of previous ones. It contains the standard analysis of the most recent economic developments, provides warnings about any problems the bank sees as most urgent, charts out the remaining agenda for the country's economic and bureaucratic reform process and addresses special topics -- this time, the issues of the labor market and the development of Indonesia's eastern region.
The World Bank fully shares the government's great concern about the country's economic overheating and lauds the measures of sound macroeconomic management being pursued. It nevertheless calls for tougher fiscal and monetary measures to ensure longer- term, sustainable growth. The report reaffirms the crucial importance of maintaining domestic and foreign investor confidence in order to sustain capital flow which is vital for coping with the unavoidable, widening current account deficit in the balance of payments within the next three years. Investors will remain confident in the long-term prospects of the economy if they operate under policy stability and predictability.
Repeating the message of its previous report, the World Bank calls for more transparency in the awarding of job contracts and in the privatization of state companies as well as in the management of the country's assets -- land, water and forests -- and in the financial system. It again urges speedier measures to remove monopolies in several commodities and nontariff barriers either to imports or exports of a number of goods.
The report is generally quite positive regarding the macroeconomic management being pursued by the government. The World Bank's concern lies in the policy inconsistencies in several sectors which it fears might increase, instead of lessen, in view of the general election next year.
The biggest difference remaining between the World Bank and the government lies in the speed in which the remaining agenda of the reform process should be accomplished. The difference is, to a certain extent, simply normal. The government naturally claims to know more than the bank about which reform measures are immediately possible without affecting social, political and economic stability. On the other hand, the bank sees things mostly in terms of the urgency for strengthening the competitiveness of Indonesia's economy amid the increasing process of economic globalization.