Thursday, August 23, 2007

VP and MoT are making sense

I noted that Vice President Jusuf Kalla is to be commendable for his economic view. Here is one example:
People should not only look at the negative side [of the current rising prices of basic commodities]. You should also look at the positive side. When the price of corn goes up, it is likely that the prices of chicken meat and eggs will go up too. That is a negative as far as consumers are concerned. But the positive side is that corn farmers are happy.
I wish it were said by pop economists.

Today, it is Trade Minister Pangestu who shows her inner, true economist. Here goes (my interpretation):
Alright, we will keep an eye on the prices of rice, sugar, and kerosene. When they shoot up, we will import. In longer run perspective, we should focus on increasing productivity. As for the cooking oil, it is more of CPO domestic supply problem, so we might want to adjust again the export duty of CPO.
That is, more market solution. (It's relieving that Ibu Mari seems not to buy the 'wajib pasok' option (domestic market obligation) -- an idea supported by Ministry of Industry and Ministry of Agriculture). Good going.

3 comments:

johnorford said...

"People should not only look at the negative side [of the current rising prices of basic commodities]. You should also look at the positive side."

True, but surely most economists would say that it's a net negative outcome -- as the markets of most of these basic commodities are really free, are they?

"(It's relieving that Ibu Mari seems not to buy the 'wajib pasok' option (domestic market obligation) -- an idea supported by Ministry of Industry and Ministry of Agriculture)."

Agreed, but

"Alright, we will keep an eye on the prices of rice, sugar, and kerosene. When they shoot up, we will import. In longer run perspective, we should focus on increasing productivity."

sounds like a very nice sounding fudge, that'll go no where. credibly focusing minds on productivity would prob only come with /real/ openness...

Aco said...

"...[B]ut surely most economists would say that it's a net negative outcome -- as the markets of most of these basic commodities are really free, are they?"

Not necessarily, John. The problem here is the net negative or positive depends on whoever says it the louder. For example, some rich rice farmers using the name of farmers association can make it as if it were true that low rice price has net negative effect for the country, while in fact Indonesia (and Indonesia's poorest farmers) are all net consumers, to whom low price should be more preferable.

"[S]ounds like a very nice sounding fudge, that'll go no where. credibly focusing minds on productivity would prob only come with /real/ openness"

The fact, John, is import is increasingly becoming taboo here. Yes, thanks to strong association and populist economists, we are becoming more inward looking. So, yes, it's a relief that such statement came from an authority.

johnorford said...

"Not necessarily, John. The problem here is the net negative or positive depends on whoever says it the louder."

yeh it's the same in most countries. i suppose it's up to the economists (not the populist kind) should come up up with more convincing arguments that can catch people's imagination and shift the majority's opinion...