Economy in need of a crisis
When Indonesia fell victim to the currency turmoil in south-east Asia last month, it rapidly became clear that sound macroeconomic fundamentals and competent technocratic management might not be enough to restore foreign confidence. More effort would be needed to convince investors that Indonesia was not about to fall victim to the Thai disease of falling exports, an overbuilt property sector and a financial system riddled with bad debt.
The revelation provided the kind of opportunity that some Indonesian technocrats have been seeking for years: the chance to move forward with deregulation in the non-financial sector. Reformers would love to disentangle the web of monopolies, oligopolies, special deals, licensing arrangements and local levies which push up inflation, reduce efficiency, hike the cost of doing business and regularly push Indonesia towards the bottom of the world corruption tables.
In early August, Saleh Afiff, the coordinating minister for finance and economics, announced that the government would dismantle one of the largest and most entrenched monopolies. Bulog, the state-owned agency which regulates trade and distribution in a wide range of commodities including rice, wheat, sugar and garlic, would lose most of its monopolies.