WTO urges RI to speed up reform for sake of stability

WTO urges RI to speed up reform for sake of stability

GENEVA (Reuters): Indonesia must accelerate implementation of
reforms if it is to stabilize its battered economy next year and
return to growth in 2000, the World Trade Organization (WTO) said
on Friday.

In a report, the global watchdog praised the government for
terminating several monopolies since the onset of Asia's
financial crisis and resisting "protectionist pressures".

But competition must be further opened up to remove
distortions and restore investors' confidence, according to the
review of Indonesia's trade policies written by WTO economists.

Indonesia's gross domestic product is expected to fall by 10
to 15 percent in 1998, it said. The world's fourth most populated
country is mired in its worst recession since 1963.

The government of President B.J. Habibie plans reforms to stop
anti-competitive practices, including monopolies and other
restrictive marketing arrangements that survived the trade
liberalization of the 1990s, according to the report.

"This will contribute to a 'leveling of the playing field'
across many sectors, creating a more open, competitive
marketplace, where few firms will remain protected," it said.

"Full implementation of these reforms, together with
Indonesia's WTO commitments, could help Indonesia to stabilize
its economy by 1999 and return to economic growth by 2000."

Success will depend on a pick-up in exports, which in turn
relies on a stable and open trading system, the report said.

It urged Indonesia's trading partners to resist their own
domestic protectionist pressure and remain open to its exports.

Japan is its main trading partner, followed by the European
Union and the United States.

WTO's 132 member states debated the 146-page report at a two-
day meeting ending on Friday. Indonesia's delegation, in a speech
to the talks on Thursday, vowed to continue reforms.

"I would like to reassure you that despite the fact that the
medium-term outlook of Indonesia's economy remains uncertain
given the severity of the crisis, it will continue to take
significant measures to liberalize its trade and investment
regimes consistent with its commitments in the WTO," Indonesia's
deputy trade envoy, Halida Miljani, told delegates.

Recovery would be "slow and difficult", she added. "Much will
depend on whether Indonesia can achieve the necessary political
stability for implementing a difficult and complex agenda of
economic reforms and whether it will receive necessary financial
support from the international community."

The sudden withdrawal of investors from Asian financial
markets in mid-1997 was compounded by growing uncertainty about
economic, social and political stability in Indonesia, WTO said.

"The result has been a major loss of confidence in Indonesia's
immediate prospects of economic recovery."

WTO expressed concern that greater use of tax incentives for
investment was encouraging "over-investment in non-competitive
sectors". High tariffs continue to protect beverages, motor
vehicles, and textiles and clothing, it added.

"The restoration of confidence in the Indonesian economy will
also entail the establishment of more rules-based, competition-
oriented internal policies.

"While the government has terminated several monopolies since
the onset of the crisis, further progress could be achieved in
strengthening the competition framework, introducing greater
transparency in the attribution of government loans and
subsidies, and effectively enforcing existing laws and
regulations in the area of government procurement," it added.