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WB sympathizes with government over slow pace of reform

Jakarta Post - June 27, 2000

Jakarta – The World Bank country director for Indonesia, Mark Baird, has apparently taken sides with President Abdurrahman Wahid over growing criticism against the government's economic policy.

Speaking at a business lunch with the Indonesian Chamber of Commerce and Industry (Kadin), Baird said most criticisms were focused on the government's weaknesses while ignoring its economic achievement.

"This political pressure has compounded the difficulties of economic policy-making, leading to slippages in implementing the reform program," Baird said during the luncheon, which International Monetary Fund (IMF) representative John R. Dodsworth had also joined.

Baird said criticism coming from demands for more economic empowerment, opportunity and accountability had outstripped the government's capacity to deliver the expected reforms. He said the newly obtained democracy had generated high expectation and increased debate on the country's economic direction.

He said in this political environment it would be unreasonable to expect the implementation of economic policies would run as smoothly as they would under the strict governance of former president Soeharto. "I often hear investors lamenting the good old days – when policy was predictable and you knew who to talk with to fix a problem," he said.

Baird urged investors to be patient as the present uncertainty was the inevitable result of Indonesia's new democracy. He said criticisms against the government often neglected improvements in other economic fields. "Economic policy has stayed largely on track. Structural policies have been guided by the comprehensive reform program outlined in the letter of intent with the IMF," he explained. The government was maintaining a conservative budget position, while Bank Indonesia had kept monetary policy under control, he said.

Baird praised the governments of former President B.J. Habibie and his successor President Abdurrahman Wahid for having managed to stabilize Indonesia's macroeconomy. He said since the economic crisis in 1997, the government had managed to control inflation and raise the Gross Domestic Product (GDP) growth rate to over three percent last year.

However, he said, the government still needed to restore the country's investment climate, which, among other things, was tainted by deteriorating law and order, corruption cases and questionable bureaucratic quality. "Investors are looking for some indication of the government's game plan – a strategy which provides a sense of direction to the reform effort and a way to measure its progress," he added.

Baird said the slow progress of implementing the reforms was most evident in the asset sales by the Indonesian Bank Restructuring Agency (IBRA), the privatization of state-owned enterprises and the restructuring of state banks.

The government expects to raise Rp 6.5 trillion (US$755 million) for the April-December state budget from the privatization of 10 state companies. Meanwhile, IBRA is expected to raise Rp 18.9 trillion from the sales of its assets, which total some Rp 600 trillion.

At the same forum, Dodsworth said the government should push ahead with its privatization program and the sale of IBRA's assets. "It's a little bit slow so we need to accelerate that," Dodsworth said in reference to the privatization program.

Asked whether this year's privatization could meet its target of Rp 6.5 trillion, he said the potential was there. "The minister has said he'll meet the target, so I think we have to take it on face value," he said of the optimism expressed by State Minister of Investment and State Enterprises Development Rozy Munir on the privatization program.

Dodsworth said despite the present sluggish market, the government did not need to revise the target. Commenting on the sales of IBRA assets, he said selling the assets now could help lift market sentiment and improve the value of future sales.

Kadin chairman Aburizal Bakrie also suggested the government sell IBRA assets now despite the present market condition. "Don't wait until the market improves. What if it doesn't? How are we going to pay our debts?" he said. Once the government decides to sell its assets it must act firmly on its decision, regardless of the criticism, he said.