`Undoubtedly, The Worst Is Not Over' A Talk With Indonesia's Economic Czar

Ginandjar is bracing for more shocks

Faced with a new round of student protests in Jakarta and looting in central Java, Indonesia's economic czar, Coordinating Minister for Finance, Economy & Industry Ginandjar Kartasasmita, knows it won't be easy to win back investor confidence. In this unpredictable environment, more troubles lie ahead, Ginandjar says. Neighboring Malaysia is adding to regional uncertainty by imposing capital controls. In an interview with Chief of Correspondents James E. Ellis, Asia Regional Editor Joyce Barnathan, and Singapore Bureau Manager Michael Shari, Ginandjar shared his concerns:

Q: What's your reaction to Malaysia's moves to restrict the flow of capital?

A: We are following Malaysia with great interest. But Malaysia is different from us. It is a smaller economy. Ours is much more complex, and our population is huge and has many ethnic differences. We are not going to change just because other people have changed their system.

Q: So you have no regrets about sticking with the International Monetary Fund program of tight money, banking reform, and abolishing monopolies?

A: I don't think we have any regrets. The IMF model is actually a combination of our own [plan] and the IMF's standard format. I don't think we will change our policy of open capital accounts. We cannot afford to lose the confidence that we are now trying to win back. But it will be interesting to follow developments in Malaysia, Thailand, and Korea to see how all these countries manage. And, of course, there's Russia.

Q: Is the worst over?

A: Undoubtedly, the worst is not over. We are now entering the post-harvest season. Farm workers then come to the cities for work, but now they cannot find jobs. The worst things that you can think of are happening to us. External shocks are translating into a drastic reduction of the exchange rate for our rupiah. And we have had a long dry season that has paralyzed rice production.

Q: What's your reaction to Suharto's claims that he has not hidden money overseas?

A: Let the people judge him. Don't ask me. Since he stepped down, he doesn't want to see any member of the Cabinet. Maybe he wants to spare us the embarrassment.

Q: What are you doing to restore confidence among the ethnic Chinese, some of whom have fled the country?

A: It's important that they come back. [Otherwise] foreign investors will say: "If your own people are fleeing the country, how can you expect us to come?" They also have their networks with other overseas Chinese. It's a huge international community. And they have partners who are not Chinese.

Q: Do the elections scheduled for next year complicate the situation?

A: We have to brace ourselves for the campaign season. This is a difficult time for us from the point of view of maintaining economic and political stability. This is going to be a very open election. Now we have 80 political parties. I do not object to political reform itself. It is a basic necessity that is important to us if we want to modernize society. But forces you unleash with political reform are something that scare many people.

Q: Is there any chance that political reform will be delayed?

A: We would like to have political reforms as soon as possible. It's good for the economy. The confidence of the market has everything to do with whether this country has established a political system supported by the people.

Q: When do you think the economy will turn around?

A: We hope this is the worst year in terms of inflation and negative GDP. We hope that we will bottom out next year and in the year 2000 we will be able to post some modest growth.

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