Devi Asmarani, Jakarta – The Indonesian government has failed to lift the country out of the economic crisis despite initial confidence in the new economic team of President Megawati Sukarnoputri.
Tempo news magazine concluded in its New Year edition that almost all indicators showed that the country's economy was still in a rut.
The rupiah lost 17 per cent of its value compared to the previous year, the magazine said. It added that the budget and fiscal crisis continued to plague the economy, and foreign investment has not returned. Economic reforms also constantly met obstacles.
President Megawati Sukarnoputri's ascent to power in August boosted confidence that her team of technocrats and professionals would bring the economy out of the doldrums, causing the rupiah to soar to the year high of 8,500 rupiah to the US dollar.
But expectations soon dwindled as various economic and political problems beset the country, sending the rupiah back to 10,200 to the dollar.
Economist Umar Juoro told The Straits Times: "In the beginning, Ms Megawati's team was overrated because it consisted of experienced professionals, but the reality soon dawned that the problems are too complex." The Indonesian government last week said its economy was bucking the regional downward trend with a 3.5 per cent growth.
But economists dismissed this claim as being "overly optimistic". They said the growth, down from 4.8 per cent in 2000, was only driven by higher consumer demand and local investment.
"Economic recovery incorporates several factors, in most cases, like in South Korea, it is the amount of foreign investment," Mr Umar said. The unstable political scene and messy decentralisation process, which caused legal uncertainty, have also put off foreign investors.
As of October, Jakarta said foreign investment approvals fell by 49 per cent to US$6.5 billion (S$12 billion). "The economic indicators show that even if there was recovery, it is a very slow one," said Mr Umar.
And, according to Tempo, 36.2 million were unemployed and the poverty index reached 50 per cent last year, due to the slow economic recovery.
Last year, the inflation rate also reportedly rose to 12.55 per cent from 9 per cent in 2000 due to cutbacks in the fuel subsidy.
Economists said the government's focus on maintaining the deficit at 3.7 per cent made it hesitant in interfering in the market to suppress prices of basic supplies, the practice of the previous Suharto government.
The state budget is also bloated with domestic and foreign debt service.
Some economists believe poor coordination and weak decision-making made it hard for the government team to implement economic reforms.
Moreover, privatisation programmes only hit half of the 6.5 trillion rupiah (S$1.15 billion) target last year while exports were affected by the September 11 attacks in the US.