Analysts pessimistic about RI recovery<\/p>\n
HONG KONG (Reuters): Indonesia's latest cabinet reshuffle has
\ndashed hopes of any short-term recovery in asset prices, adding
\nfresh political risks for investors considering a return to the
\ncountry's markets.<\/p>\n
Among analysts and commentators there was a widespread sense
\nof opportunity lost on Thursday, although most observers could
\nsee both good and bad in President Abdurrahman Wahid's new
\ngovernment line up.<\/p>\n
However, overall it was a thumbs down.<\/p>\n
\"I think it represents a credit negative development in terms
\nof Indonesia's risk premium,\" said John Woods, head of research
\nat HSBC Markets.<\/p>\n
There had been widespread hopes that President Wahid's new
\ncabinet line up, following on the heels of his successful
\nhandling in August of a meeting by the country's top legislative
\nbody, would signal a renewed effort to fix the economy and a rise
\nin asset prices.<\/p>\n
On Wednesday Abdurrahman, often referred to by his nickname,
\nGus Dur, named a retired general, Susilo Bambang Yudhoyono, as
\nchief political minister and an economist, Rizal Ramli, as top
\neconomics minister -- two new powerful positions in the
\ngovernment.<\/p>\n
He appointed a banker, Prijadi Praptosuhardjo, as finance
\nminister and re-appointed the widely respected Marzuki Darusman
\nto the sensitive post of attorney-general. Alwi Shihab kept his
\npost as foreign minister.<\/p>\n
But almost immediately analysts saw flaws in the changes.<\/p>\n
One key drawback in the new line up was that the new
\nappointees appeared to be chosen for a closeness to the president
\nand not necessarily as the best people for the job.<\/p>\n
\"The choice of finance minister was very disappointing,\" said
\nSimon Flint, regional currency strategist at Bank of America in
\nSingapore.<\/p>\n
Analysts are nervous about the apparent sidelining of
\nIndonesia's largest political party, the PDI Perjuangan, and the
\nclear lack of endorsement by PDI Perjuangan's leader and
\nIndonesian vice president Megawati Soekarnoputri for the new
\ncabinet.<\/p>\n
\"From a political perspective it looks as if this government
\nhas a limited shelf life,\" said HSBC's Woods.<\/p>\n
\"I'm not sure the opposition will sit by and allow Wahid to
\ndominate,\" he said.<\/p>\n
The sidelining of Indonesia's top political parties in the new
\ncabinet could bring with it serious legislative problems.<\/p>\n
\"The concern is that without representation of the two major
\nparties in parliament in the Wahid cabinet, the president is
\nlikely to face renewed political tensions and delays in passing
\nimportant legislation,\" said Scott Wilson, sovereign debt analyst
\nat UBS Warburg Asia.<\/p>\n
But the good news was that the new Cabinet clearly owes its
\nallegiance to President Abdurrahman, rather than their respective
\npolitical parties.<\/p>\n
\"The appointees are either relatively apolitical or are
\nassociates of Gus Dur,\" said Bank of America's Flint.<\/p>\n
The new senior ministers, Susilo and Rizal, are also seen as
\nable to provide strong leadership to the new cabinet.<\/p>\n
\"I don't regard it as bad that Bambang Yudhoyono is a
\ncoordinating minister,\" said Gene Galbraith, chief executive and
\nchairman of Asiawise.<\/p>\n
\"At the end of the day President Wahid has done a masterly job
\nof effecting a very rapid transition to new players in the
\nmilitary,\" Galbraith said.<\/p>\n
Galbraith said the survival of President Abdurrahman in
\ngovernment still represents the best outcome for Indonesia.<\/p>\n
\"Megawati would be much worse than President Wahid, who
\nadmittedly has been a bit of a disappointment,\" he said.<\/p>\n
But the rise in political risk is likely to delay the return
\nof much needed foreign investment to Indonesia.<\/p>\n
\"I think it's going to take time for people to feel there is a
\nprocess in place. I think it's also going to take a recovery
\nelsewhere, which will make Indonesia appear more inexpensive in
\ncomparison with other assets in the region,\" said Galbraith.<\/p>\n
\"Lastly it's going to take a determination on the part of the
\nIndonesians, in particular the new economic team, to address the
\nvery real issue of corruption,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/analysts-pessimistic-about-ri-recovery-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}