Downside risks in 2004<\/p>\n
The verdict of most analysts is unanimous. Indonesia's economy
\nwill continue to expand next year, but only at a slightly higher
\nrate than this year's moderate growth, which is estimated at
\naround 4 percent, due to the extent of downside risks related to
\nthe 2004 elections and the end of the International Monetary Fund
\n(IMF) program.<\/p>\n
Indonesia's economic management will indeed enter a new phase
\nnext year when, for the first time since November, 1997, the
\ncountry will implement its reform agenda without the punishment-
\nand-reward mechanism of the IMF facility.<\/p>\n
Fortunately, though, the world's economic powerhouses -- the
\nUnited States, Japan and Europe -- are all predicted to post
\nstronger growth next year and this could create additional
\nexternal demand for Indonesian products, provided they remain
\ncompetitive on the international market.<\/p>\n
It is too early to judge whether the government will have the
\npolitical will to maintain the pace of reform in view of the
\nelections of House of Representatives members in April and the
\npresident and vice president in July.<\/p>\n
An electoral period usually creates great temptations for the
\nincumbent government to focus on its short-term interests of
\nwinning the ballots by introducing populist programs at the
\nexpense of the long-term good of the economy.<\/p>\n
The improving macroeconomic stability over the last two years
\nis seen as a strong foundation with which to weather the
\npolitical turbulence and heightened political emotions. But delay
\nin, let alone backtracking on, reform implementation could erode
\nmarket confidence in the government's credibility and
\nconsequently the economic outlook.<\/p>\n
The risks of isolated violence due to uncontrolled political
\nemotions or protracted disputes over the interpretation of
\nelection rules cannot simply be brushed off, as most voters and
\neven party leaders have yet to accustom themselves to the
\nelectoral rules and procedures, which are largely new.<\/p>\n
However, it is of great comfort to know that none of the 24
\npolitical parties eligible to take part in the 2004 elections has
\nany plans to drastically change the basic principles of the
\nnational economy. All are for a market economy based on fair,
\nopen competition with varying modifications and emphasis to
\nreduce poverty and enhance a more equitable distribution of
\nincome.<\/p>\n
One is nevertheless a bit nervous thinking about three rounds
\nof elections, each with street campaign rallies, within a period
\nof just five months and involving more than 140 million
\nregistered voters spread across one of the world's largest
\narchipelagos, with both the most primitive and sophisticated of
\ntransportation and communications modes.<\/p>\n
Many also worry about how the economy will fare or who will
\nmanage the economy when the executive and legislative branches of
\nthe government are preoccupied by the election agenda from March
\nto September.<\/p>\n
The government has set for itself an ambitious reform agenda,
\nas stipulated in its White Paper, for implementation next year.
\nObviously, keeping the execution of the whole agenda on track
\nwon't be easy or even rather impossible.<\/p>\n
It is therefore imperative for the government to focus its
\nattention on the reform measures that are most crucial to
\nenhancing good governance, as this is the most important issue
\nwithin the structural reforms that are designed to stimulate
\ninvestment, export and employment creation.<\/p>\n
Business leader Aburizal Bakrie, chairman of the Indonesian
\nChamber of Commerce and Industry, reiterated the importance of
\ngood governance for the economy in his year-end review with the
\nmass media last week.<\/p>\n
He rightly argued that good governance is vital to improve the
\ninvestment climate and consequently the overall competitiveness
\nof the Indonesian economy. It is investment that creates jobs,
\nwhich in turn generate wages and purchasing power to fuel market
\ndemand.<\/p>\n
However, downside risks are not the only things one may think
\nof in relation to the upcoming elections.<\/p>\n
All agree that a successful election -- meaning the election
\nis perceived to be fair and the elected government is seen as
\ncredible and strong enough to continue the reform process -- will
\nbe a great boon to the economy as domestic investment will be
\nreinvigorated and foreign investors will return in droves to
\nstrengthen the virtuous circle of macroeconomic stability.<\/p>\n
__________<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/downside-risks-in-2004-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }