The government budget speech and the newly signed Letter of Intent for the IMF have many things in common but the differences are also very important.  The LoI, for one, stressed the eradication of corruption much more than the budget speech.  Prevention of further corruption in high places cannot be done only by designing better procedures, greater transparencies and strengthening of the judiciary, as stressed in the budget speech, but heads of corruptors in the past must roll as a result of punitive measures and show of seriousness of intent by the government.  Giving (only) carrots, i.e. incentives, for good behavior, like promising very high salary increases for ministers, is not enough.  The government should walk around with a big stick and be seen to use it.  Perhaps because of these international pressures, the office of the Attorney General has recently increased the number of suspects in the Bank Bali case, with one big name, a former minister in the Habibie cabinet.

A budget speech should explain the budget figures as a reflection of the government’s fiscal policy.  The major tenet this year is prudence.  Revenues are very limited in a time of incipient economic recovery.  A lot of budget figures are stated as percentages of the national product.  A very rough measure of the latter is about US$175 billion, an about 15% drop from pre-crisis levels of a bit over US$200 billion.  The rupiah equivalent is about (i.e., a bit less than) Rp1000 trillion for the year 2000. 

The budget deficit should not exceed 5% of national product, and half of it should come from domestic sources, including sales of assets held by IBRA and privatization of state enterprises.  Another half can be expected from international aid.  The prospect for economic growth is 3.5%, which is not bad under the circumstances (increasing to 5% for 2001), but there should be an all out effort to keep the inflation  at low single digit levels.  Fiscal policy by the government and monetary policy by Bank Indonesia should attain that objective.  Because fuel prices and electricity rates will be increased, as well as civil servants’ salaries, it will be tall order to maintain inflation at less than 5% per annum.

The budget speech is also an occasion to stress important government policies for the year.  Like the LoI with the IMF, the government’s speech to parliament stressed further progress with respect to banking restructuring and corporate debts restructuring.  The authority of IBRA will be reinforced, as well as INDRA and the Jakarta Initiative Task Force handling the private sector debts.

The LoI with the IMF, however, also stresses “how the government can help restore a functioning banking system  that can efficiently allocate credit  and how the large non-performing debts of the past can be regularized so that businesses can once again become creditworthy” (quoted from an article by John Dodsworth, the IMF’s Senior Resident Representative in Jakarta, in Jakarta Post).

The LoI also stressed a comprehensive program of audits of public institutions, including investigative audits where needed.  “Given the importance of upholding the rule of law, a task force, headed by the Attorney General, will focus its work initially on court corruption, investigating any possible malfeasance by judges or lawyers”, again quoting Dodsworth.

Finally, on a popular pastime these days, that is, scoring Gus Dur’s first 100 days. The management of the economic agenda can be given an average B score. The management of the macro-economic policies, with the help of the IMF, can be given a B-plus score, because inflation is low, the rupiah rate relatively stable, the economy coming out of a deep negative growth recession.  The handling of the banking crisis and restructuring is sometimes clumsy and often cost increasing and is probably at best a B-minus worth.  The progress in restructuring private debts, by INDRA and the Jakarta Initiative Task Force, is so far awfully slow and unpromising.  The score should be a failing grade C.  But in the next semester there is ample room for improvements. 

The restructuring process consists of defining the right concepts and policies, setting up institutions, supported by an adequate legal framework for authority and protection, and manning the institutions with the right people.  The concepts and policies are gradually in place, and so are the institutions, like IBRA.  What have been lacking are the necessary legal protection and the right people to man them.  The leadership of IBRA has recently been revamped by Gus Dur.

The most difficult agenda of Gus Dur and his government is the political one.  The political crisis in Aceh is not solved, and the violence in Ambon, North Maluku has not been under control effectively, while such social conflict is spreading to Lombok Island.  Separatist sentiments in Papua (former name: Irian Jaya) are still simmering.  The civil-military relationship, i.e., the Gus Dur  Wiranto relationship does not look well from the outside.  But Gus Dur’s idea of solving the Military’s political role is to give its phasing out at least five years time.