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Poriaman Sitanggang for Asiaweek
The Technocrat: Salim says the nation won over crisis once before -- hyperinflation, no jobs, decrepit infrastructure. It can win again

When History Repeats Itself
A new president, economic ills and Emil Salim

At 69, when many people are enjoying peaceful retirement, Emil Salim has taken one of Asia's toughest jobs: advising Indonesia's president on how to nurse a shattered, debt-laden economy back to health. But he has had much experience: As a young economist in the late 1960s, he was one of the so-called Berkeley Mafia, a group of mainly U.S.-educated technocrats who advised then-president Suharto on how to lift Indonesia out of the economic quagmire inherited from founding father Sukarno.

He left the government in 1993 and turned critic after a falling out with Suharto over plans to turn Indonesia into a high-tech powerhouse with huge state funding. Even with his council job, Salim still teaches economics two days a week at the University of Indonesia. That helps him keep abreast of economic theories, he told Asiaweek Correspondent Warren Caragata. Excerpts of their half-hour talk:

Can the economy recover when the banking system still has so many problems?
The intention is to have not only the funding, but also new blood, get foreign experts in, so the banks can run. But you cannot settle the economy in one or two days. This is a process and what's important to the market is that we are consistent in applying the process.

What about corporate debt?
The Jakarta Initiative Task Force is now tackling 38 companies in which the foreign debt is to be settled rather soon, hopefully this year.

Some people think economic reforms can be done much faster?
We now must take into account the process of democracy. You have to talk to the Parliament, you have to consult a lot of people. It's not that you can issue an order and that's it . . . Of course, we cannot stretch this tolerance [the people's patience] too long, otherwise it will break. We must make it in 2000, so at least there is a light at the end of the tunnel. By 2001 we can go out of this crisis.

Isn't it frustrating that, just when you start to build confidence, a bad thing happens?
Yes. The Paris Club meeting [rescheduling $5.8 billion of government-to-government debt] was very successful. Then, bang, two ministers were replaced [investment minister Laksamana Sukardi and trade minister Yusuf Kalla]. Economics and politics are not synchronized very well and that is working to the disadvantage of economics.

So what does the president say to that?
He said he was not aware [the sacking of the two ministers] had a negative impact. In his view it would have a positive impact. It's the same when he talks about maintaining Hasyim Wahid [his brother, as a self-styled debt collector for IBRA]. What the market thinks is not quite the same as what the president feels.

Does IBRA have enough political backing for its program?
Cacuk [IBRA chairman Cacuk Sudarijanto] has big political support. On the one hand, IBRA is requested to collect funds. On the other hand, many people want to use this opportunity to reshape the whole economy, restructure ownership and so on. These are two conflicting things. What we need to do now is firm up the task of IBRA to get funds as fast as possible to get over this crisis. Then later on, tackle other aspects: the extent of industrialization, ownership and all these other things. It is always like this. You have people who stick to economics and others who take a political view.

What about politicians and their friends wanting to get their hands on the assets?
IBRA controls more or less 40% of the total assets of the state, so of course it's like sugar attracting a lot of ants. Now our task is to prevent it. How? To keep [the process] transparent, keep the rules of the game clean and as open as possible, and introduce transparency, control and so on.

Do you have doubts about your job now?
It's not a question of doubt. You feel you must do it. I am confident. Look, put it this way, in 1966-68 we were facing the same crisis: an inflation rate of 500%, high unemployment, infrastructure in bad shape. But we made it from a low-income country in 1968 to middle-income by the late '80s. So this nation, these people, can do it.

Have Indonesian bankers learned the lessons of the Crisis?
There is a general impression that you can't do business as usual anymore. However, in establishing good governance, the environment is not yet conducive to it. The environment is still corrupt. The judiciary is still in very difficult shape and you still hear about these KKN [the Indonesian acronym for corruption, collusion and nepotism] elements, and so on. Therefore, the need for good governance must be strengthened.

Some decisions, like the appointment of the president's brother as a debt collector for IBRA (he has resigned) don't help.
No. That is actually an indication the environment is not conducive [to reform]. But [many politicians] don't see it that way. People are justifying it as a necessity and that [shows] the environment has not changed in its fundamentals.

Will it ever change?
There are new elements now in Indonesian politics: transparency and an open and free press. The concept of shame is being introduced, and Parliament is being much more vocal. These elements make possible the change of attitudes. What you see now is a culture of saying no to whatever comes from the establishment. People are fed up with the past regime. With Gus Dur [President Wahid] the attitude continues. Now we must prove to the people that there is no reason to be against the establishment because it is also fighting against what you are against.

It is the same with economics. You give the right signals and build confidence and then things will go in the right direction. It's not something that can be done in three or four or six months. But what is important is that you are on the right track. It looks bad but I am optimistic. I see that today is better than yesterday.

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