Urip Hudiono, Jakarta – A group of economists have criticized the government for being "overly pro-market" and abandoning its own pro-poor policies, claiming that these were the underlying factors preventing the real sector from generating higher growth.
Recent government policies to implement free-market policies might have helped improve macroeconomic stability and create booming financial markets, but were at the expense of "quality development" and the well-being of the majority of the public.
"The free market is not the solution to everything, and not everything should be left to the market," economist Rizal Ramli of the Econit think tank said during a public discussion Friday. "If the government needs to intervene in the market in the interests of the wider public, then it should do so."
Rizal said that 80 percent of Indonesia's population still said that "fulfilling their basic needs" – particularly food – was their top priority. It was against this background, he said, that the government had to base its economic policies.
He said that the government had even failed to stabilize rising rice and cooking oil prices – both of which were of major importance to the poor – out of reluctance to disrupt market demand, supply and pricing mechanisms.
Rizal, himself a former coordinating minister for the economy, also criticized reducing agricultural subsidies in the name of free trade when, he said, it had been proven in the past that they helped create jobs, and increase income and production.
Economist Hendri Saparini similarly criticized the government's free-market policies, questioning the unrestricted export of raw materials, which he said hampered the development of local industry.
"What has happened, take rattan for example, is that local furniture manufacturers are suffering. Rattan furniture producers are, meanwhile, sprouting up in China, and we now import from them," she said.
Hendri also criticized recent suggestions of tax breaks for publicly listed companies as part of the government's efforts to develop the country's capital markets, saying that once again the government was neglecting to focus development on the poor.
"Market players only account for a small proportion of the people, with most of them being middle- to high-income people anyway," she said.
She suggested that the government focus its tax incentives on small businesses and cooperatives, and incorporate concrete government action in the bill on the development the SME sector that was currently being deliberated, adding that SMEs accounted for most businesses in the country and provided the most employment.
Dradjad H. Wibowo, a legislator from the National Mandate Party, said his party would suggest lower tax rates for small businesses in the new income tax bill.
"We will also propose a higher income tax threshold to benefit lower-income workers," he said. "It's better that the money remain in the hands of the people than be taxed so that they can used it on spending and production to help the real sector."