Economists say Indonesia needs credible government<\/p>\n
JAKARTA (JP): The country's most pressing agenda in
\nextricating itself from the devastating economic crisis is to put
\na new and credible government in place, participants in a seminar
\nconcluded on Tuesday.<\/p>\n
An economist from Gadjah Mada University in Yogyakarta, A.
\nTony Prasetiantono, said a credible government was crucial to
\nrestore weakened confidence because the administration of
\nPresident B.J. Habibie was a lost cause.<\/p>\n
\"The toughest agenda is to restore confidence. And this can no
\nlonger be done by the present government because it has committed
\ntoo many mistakes,\" he told the seminar on \"The economic and
\npolitical agenda of the new government\", which was organized by
\nthe Bisnis Indonesia daily.<\/p>\n
Noted economist Faisal Basri agreed that \"it would be the
\nworst-case scenario if Habibie were reelected\".<\/p>\n
The presidential election is scheduled for late in October or
\nearly November.<\/p>\n
The economic crisis struck the country in the middle of 1997
\nin a region-wide contagion which began when the Thai baht was
\nassailed by speculators.<\/p>\n
But while Thailand and other neighboring countries have
\nstarted to pull themselves out of the worst of the crisis,
\nIndonesia's prospects appear grim in the wake of the Bank Bali
\nscandal, in which several close Habibie aides have been
\nimplicated, the debacle in East Timor and bloody student
\ndemonstrations last week in which at least eight people died.<\/p>\n
The rupiah is hovering around 8,800 to the U.S. dollar,
\ncompared to about 6,500 in June before the new problems emerged.<\/p>\n
\"We're on the brink of a second-chapter crisis,\" Tony said.<\/p>\n
He said that restoring confidence was a key factor in
\neffecting economic recovery.<\/p>\n
\"What we need is a conducive environment to prevent capital
\nflight.\"<\/p>\n
He said an estimated US$80 billion was taken out of the
\ncountry from 1997 to 1999.<\/p>\n
\"It's grossly misguided to solve the current economic crisis
\nonly through economic instruments. The capital flight problem
\ncan't be solved by a high interest rate policy.\"<\/p>\n
Many Indonesian businesspeople, particularly those of Chinese
\ndescent, have transferred their money overseas in the wake of the
\npolitical unrest that followed the economic crisis. Chinese-
\nIndonesians have often been targeted in riots.<\/p>\n
Tony said monetary and fiscal policies would be more effective
\nonce a restored confidence put an end to capital flight.<\/p>\n
\"Imagine the huge cost inflicted by the central bank's move to
\nraise interest rates to as high as to 70 percent last year, only
\nto see the rupiah weakening again today.\"<\/p>\n
Faisal said the return of funds currently deposited overseas
\nby Indonesian businesspeople was also crucial to woo back foreign
\ninvestors.<\/p>\n
\"Don't expect that foreign investors will return to Indonesia
\nas long as the money of the Chinese-Indonesian businesspeople is
\nstill held overseas. To foreign investors, the return of the
\nmoney signals political stability and legal certainty,\" said the
\nsecretary-general of the National Mandate Party (PAN).<\/p>\n
Tony said a credible government would need to keep the nation
\nunited and prevent ethnic conflicts.<\/p>\n
\"This is very crucial. If the new government can bind this
\nnation in unity, capital will flow back so that we won't need
\nmuch IMF help,\" he said, referring to the US$43 billion bailout
\narranged by the International Monetary Fund.<\/p>\n
The political temperature is rising nationwide before the
\npresidential election.<\/p>\n
The ruling Golkar Party has nominated Habibie for the
\npresidency and Military Commander Gen. Wiranto for vice president
\ndespite strong opposition from a reformist faction within its
\nranks.<\/p>\n
Students have decried the choice of Wiranto, saying the
\nmilitary is bent on sabotaging the movement for democracy.<\/p>\n
Considered the most popular presidential candidate among the
\npeople is Megawati Soekarnoputri, chairwoman of the Indonesian
\nDemocratic Party of Struggle (PDI Perjuangan). Although the party
\nwon 34 percent of the vote in the June general election, it lacks
\na majority to ensure Megawati's presidency. (rei)<\/p>",
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