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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (5401)	8/6/1998 11:58:00 PM
From: Stitch	Respond to of 9980

Sam, This grim report was posted by Defrocked on the Semi Equip thread: best, Stitch FOCUS-Indonesia in danger of collapse-economists By Mantik Kusjanto JAKARTA, Aug 6 (Reuters) - Indonesia faces social and economic collapse unless the government acts with greater urgency to tackle the country's financial crisis, a group of prominent local economists warned on Thursday. ''If there is no prompt action, the situation will move towards a total destruction of the Indonesian economy, bringing along the collapse of the social and political life of the people and even the existence of Indonesia,'' the 15 economists said in a joint declaration. They said the Indonesian economy faced its worst crisis in 32 years, with the economy expected to contract more than 15 percent in 1998, inflation likely to hit 100 percent, and the number of people living under the poverty line soaring to at least 80 million from 22.5 million in 1996. ''Class conflict could happen where people with no rice beat up others just for rice ... We are running against the clock,'' said Sjahrir, an independent economist and one of those who signed the declaration. Many of the economists were from the country's most prominent universities, the University of Indonesia in Jakarta and Gajah Mada University in Yogyakarta. Their declaration said that economic policy under President B.J. Habibie, who succeeded Suharto in May, was no better than under the old administration, adding that the government's lack of legitimacy was impeding economic recovery. ''The government has no sense of crisis,'' said Sjahrir. ''They (ministers) came back from Paris smiling and even proud as if it was a success. Habibie said it was a proof that international confidence has returned,'' he said. International donors organised under the Consultative Group for Indonesia meeting last month in Paris agreed to disburse $7.9 billion in aid in the fiscal year to end-March 1999. The International Monetary Fund also said last month it was topping up a $41.2 billion international rescue package for Indonesia with a further $6.2 billion. ''Confidence has not returned. They (donors) had mercy with us. We are dying, do you understand? We are almost destroyed, that is why we beg for mercy, for fresh air to breath. There is no sense of crisis until now,'' Sjahrir said. The declaration said economic stability was a precondition for Indonesia's reconstruction. It said that could be achieved through fiscal and monetary policies as well as a sensitive exchange rate and with policies to boost exports. It said subsidies were necessary for basic commodities, medicine and employment schemes. But a budget deficit of 8.5 percent of gross domestic product, which Indonesia has budgeted this year to pay for subsidies and social safety nets, was too high. ''It threatens macro-economic stability through uncontrolled inflation,'' the statement said. The economists also called for the government to stop the bail-out of troubled banks and to take legal action against bank owners, management and debtors. ''We need an exit policy ... for mismanaged and financially distressed banks and to remove moral hazard in the banking system,'' the declaration said. It said further policies hampering market mechanisms, such as import restrictions, could not be justified. ''Differences in domestic and overseas prices will end up giving subsidies to foreigners,'' the statement said, adding economic resilience could only be formed if businesses were focused on exports. The economists said all citizens must feel that they and their businesses were protected by the government. ''This is part of human and citizens' rights which have to be respected. This is not just to draw back capital, but to give a solid business foundation domestically,'' they said. Thousands of ethnic Chinese, who control a significant share of Indonesia's economy, have fled the country since they were targeted in widespread unrest in May. Many took their capital with them.