Bad news comes last in the election’s ‘silly’ season

Meidyatama Suryodiningrat ,  THE JAKARTA POST ,  JAKARTA   |  Thu, 02/26/2009 9:16 AM  |  Headlines

If you can keep your head while others are losing theirs, humorist Jean Kerr wrote, “it’s possible you haven’t grasped the situation”.

It’s hard not to grasp the present predicament because numbers don’t lie: Growth could fall below 4 percent. Unemployment is rising to 9 percent, with the ILO predicting 170,000 layoffs this year. After diminishing 14 percent, the rupiah has yet to strengthen.

Meanwhile, exports and investment, the primary engines of growth, continue to slump.
Crises are cyclical trials.

In Chinese, the character for “crisis” comprises of two characters: one danger, the other opportunity.

Every deserving leader sees both elements in a crisis. Undeserving ones see neither.

Leadership is about problem-solving, but solutions cannot be found when the problems are not acknowledged.

Business leaders concede that Indonesia’s economic fundamentals are sound and the impending storm need not be as calamitous as in 1998, but privately they worry at the seeming sense of denial prevalent in government ranks.

There is never a good or bad time for elections, but 2009 seems especially inopportune.

With as many as three elections on the horizon, who will navigate the ship when its captains blur campaign promises with policy action?

As most senior officials are directly or indirectly campaigning for their political future, focus will weigh heavily on good news politics.

Which politician seeking the sympathetic whim of voters dare take necessary, albeit unpleasant, economic decisions?

The overtures made by the government thus far seem optimistic.

In January, they announced a stimulus package of Rp 50 trillion for initiatives such as tax relief and infrastructure projects.

The government confidently targets 5 percent growth, but the Asia Development Bank and World Bank have suggested lower estimates.

Furthermore, the government says 2.6 million new jobs will be created, much of these through construction work in subsidized housing and overseas migrant work.

Nevertheless, the International Labor Organization reported that Indonesia must create 3.6 million new jobs over the next 20 months to offset the potentially lost employment and expected labor growth.

Given that economists equate each percentage of GDP growth to some 300,000 new jobs, the government’s projections leave little room for error (failure).

Arguably, it would have been suitable if Indonesia did have a lame duck presidency since it would be in the peculiar position of having more leeway to take unpopular but necessary actions without facing consequences in the subsequent election.

Under the present status quo there is no reason to expect effective governance until a new mandate has been awarded at the end of the year.

Only ministers who are not politically affiliated are likely to have their eye “on the ball”, making sure the flailing economy does not collapse. Our saving grace is that top economic ministers are non-politicians.

The urgency of matters is not helped by the acquiescence of the business community who, in their recognition on the need for sociopolitical stability, delay the inevitable and thus prolong the internal abscess in their companies.

The government successfully lobbied businesses against immediate downsizing, partly out of welfare concerns but mostly for election security needs.

The first three months of this year sees companies engaged in efficiency of operational expenses. Contract workers are streamlined and overtime cut back. Households across the country were also slightly assuaged by reduced gasoline prices and stable food spending.

The wheels of the real economy feel some reprieve as “hot” campaign money, estimated at between Rp 5 billion and Rp 10 billion, revolves during the silly season.

It will be at the end of the second trimester that the pinch will sore as businesses — unable to sustain export orders at the beginning of 2009 — rationalize their operations.

Due to costly dismissal laws, most companies will seek to furlough workers rather than outright dismissal, thereby disguising further the true impact of the crisis.

The informal sector, a life preserver for so many in 1998, many not be as flexible a decade later. Over two-thirds of total employed already depend on the informal sector.

Though many job seekers, on furlough or out of work, will move to the informal sector and lessen the overall national jobless rate, income and spending will be weakened.

The estimated average monthly income per capita of the informal sector is around Rp 640,000 (US$54.20), compared to the formal sector of Rp 2.4 million.

Pre-election periods are often called the silly season. But in this passage of incredulity, this nation cannot afford folly, even in the name of democracy.

As we learned in 1998, bad situations do not need to become worse to get ugly.

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