SOME SILVER LINING ?
> Kadin Indonesia Bulletin <
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SOME SILVER LINING ? |
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> Kadin Indonesia Bulletin < |
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Pebruari 1998 Writing at mid February 1999, there are a few silver linings but the clouds are still mainly dark. Hope that in a month or so there will be more sunlight. At the political front the big news is the timely conclusion of the three laws governing the next election, conditions the more than hundred political parties have to meet to take part in the general elections and the composition of the future parliament and congress. Under heavy public pressure the government in turn persuaded the parliament not to miss the deadline of January 28. Such failure may trigger a chain reaction, delaying the date for the general elections, set for June 7. Hence the good news here is that consensus decisions are still feasible in a more fractured political situation. There has also been an emerging consensus in the society that until June the overwhelming urgency should be the preparation of fair and transparent elections, which should be regarded as a referee for the nation on its course to political democracy. Such priority setting means that other political aims, like bringing Suharto to court, the immediate abandonment of the dual-function of the army, and other equally controversial issues, must not be pressed too hard and await the post election government for final resolution. On February 9 some 200 students tested this proposition. They staged a demonstration near the parliament, repeating the old demands, including replacement of the Habibie government by a more representative "presidium". This time the security forces, in a new resolve, came harder on them, but there was no outcry and vocal support from the general public afterwards. The public is probably tired of the daily demonstrations causing irritating traffic jams and the possibility of price rises. Since the Ramadhan (i.e. fasting) month Jakarta was free of disturbances and this relative quiet and greater order have been very welcome. What causes still apprehension with the general public is the continuing break down of law and order and security on the ground. A news item from East Java revealed that exports from Surabaya went down in January because transportation of the goods to and from the harbor was subject to unpredictable harassment. Hence the economic crisis is still going on. The government insists that "the worse is almost over" in the sense that the economy is not contracting much longer. After an almost 15% contraction of the economy that would not be an unrealistic proposition. But we do not have adequate indications. The recent monthly import bill still is around $2.2 billion when normally it should be $3.5 billion. There is little purchasing power in the society, while the government is wrestling with "limited absorptive capacity" to spend the Rp18 trillion for "social safety net" programs because both the government bureaucracy and the World Bank are very sensitive to accusations of corruption. New and unfamiliar programs are also difficult to get off the ground. Only about 20% was disbursed. This does not add much to contracted general purchasing power. A recent positive point is the relative stability of the rupiah rate of exchange. This rate is stronger than Rp9000 per US dollar. Although in November 1998 the rate was even stronger, at Rp7500, nevertheless it is small consolation. If this stability continues then interest rates will go down and the "negative spread" (lending rates less than deposit rates of interest) will stop haunting banks. The international world has thrown its support behind Indonesia and behind the government. Habibie's recent initiative to have speedy resolution of the East Timor problem and his credible promise to hold fair elections have contributed to this development. Japan has promised to give Indonesia $2.4 billion out of the $30 billion Myazawa fund, and more could be forthcoming. There is a hint that Japan is willing to finance part of the requirements for bank recapitalization, provided the IMF comes on board. The government is now lobbying for another billion dollars from the IMF. A small but encouraging news item recently is the decision of the US food giant, Heinz, to take majority ownership in ABC, the large local food producer and distributor. This may be a shadow of investments to come. With such prospects of improvements in the situation, one can only hope that next months we can give an even more encouraging assessment. After inflation has peaked in January, because of Ramadhan and insecurity of transportation, the hope and expectation is for a very low figure in February. If this comes true than there is more proof that the high inflation is under control. Such is part of the IMF/GOI favorable scenario. (SADLI) |
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