Possibility of chaos in 1998 ruled out<\/p>\n
JAKARTA (JP): Noted economist Sjahrir predicts an average
\ngrowth rate of more than seven percent for Indonesia's economy
\nduring the 1995-2000 period and rules out the possibility of
\nchaos during the succession of the national leadership in 1998.<\/p>\n
Sjahrir foresees an economic growth (in terms of gross
\ndomestic product) of 7.5 percent this year which will be fueled
\nmainly by the manufacturing and construction sectors.<\/p>\n
\"I think the economic expansion will run even at a higher pace
\nin 1996 and 1997 as a result of the implementation of the huge
\nsums of new investment commitments licensed by the Investment
\nCoordinating Board (BKPM) over the last two years,\" Sjahrir said
\nyesterday.<\/p>\n
Sjahrir was one of the panelists at a one-day seminar,
\norganized by Citibank, which discussed the prospects of
\nIndonesia's economy and the capital market in the run up to the
\nyear 2000.<\/p>\n
He based his prediction on the assumption that the economic
\nreform process, such as deregulation and economic liberalization,
\nwill continue in line with Indonesia's commitments to the ASEAN
\nFree Trade Area in 2003, APEC free trade in 2010 and the
\nmultilateral trading arrangements under the World Trade
\nOrganization.<\/p>\n
Sjahrir also assumed that the government would maintain its
\nprudent macro-economic management such as conservative monetary
\nand fiscal policies, balanced budget, prudent borrowings and
\nrealistic foreign exchange rate policy.<\/p>\n
\"I think the impetus of economic growth will be the
\nmanufacturing industry and other sectors related to such
\ninfrastructure as transportation, telecommunications, electricity
\nand construction,\" noted Sjahrir, managing director of the
\nInstitute for Economic and Financial Research.<\/p>\n
The only variable which remains largely a subject of
\nspeculation is the composition of the next cabinet (1998-2003)
\nand its policy, he said.<\/p>\n
\"However, given the intensive inter-linkages between the state
\nbudget and balance of payments, which are both highly vulnerable
\nto external factors, I don't think the government will have much
\nleeway for substantial changes in its macro-economic policies to
\nmaintain stability,\" he pointed out.<\/p>\n
Maintaining a relatively low inflation rate is also crucial to
\nefforts to maintain economic stability, according to him.<\/p>\n
\"It will be extremely difficult for Indonesia to maintain its
\nexternal balance if the country's inflation rate remains higher
\nthan the rate of the rupiah's depreciation against the U.S.
\ndollar,\" Sjahrir cautioned.<\/p>\n
Succession<\/p>\n
He acknowledged that predicting the prospects and outlook of
\nIndonesia's economy would not be so reliable without taking into
\naccount the impact of the succession of the national leadership
\nin early 1998.<\/p>\n
President Soeharto will end his sixth successive five-year
\nterm in March, 1998.<\/p>\n
Sjahrir also admitted that the stability in the political
\nsystem has been one of the main supporting factors that have
\nenabled the country to maintain a steady, robust economic growth
\nover the past 30 years.<\/p>\n
\"I don't rule out the possibility of some political upheavals
\nin the run-up to the succession. Nor do I rule out the
\npossibility of changes in the political system.\"<\/p>\n
\"But I strongly rule out any possibility of chaos,\" Sjahrir
\npointed out.<\/p>\n
He argued that Indonesia's present economic structure and
\nfoundation and the micro-dynamics of the economy are much
\ndifferent from those before the mid-1960s.<\/p>\n
\"The most notable change is that the micro-production units
\nwhich in the past used to be dominated by households (farmers)
\nhave now shifted more to business units that are more efficient
\nentities,\" he added.<\/p>\n
Moreover, according to him, Indonesia's economy has become
\nmore interlinked with the global economy.<\/p>\n
In fact, he added, its relatively large current account
\ndeficit and big debt installments have forced the country to rely
\nlargely on foreign capital flows.<\/p>\n
\"Then, Indonesia, due to its open capital account system,
\ncannot afford a prolonged power struggle which may set off
\nchaos,\" he said in citing another reason as to why the government
\nwill always go all out to maintain stability, irrespective of who
\nwill become the next president.<\/p>\n
He also cited the steady increase in the number of companies
\ngoing public through the domestic and international stock
\nexchanges as another deterrent to any possible chaos related to
\nthe succession.<\/p>\n
\"I fully agree with the view of Bacelius Ruru (Chairman of the
\nCapital Market Supervisory Agency) that the stock exchanges have
\nbeen promoting the democratization of capital in the country,\" he
\nsaid.<\/p>\n
Sjahrir therefore called on the approximate 150 businessmen,
\nmostly portfolio investors attending the seminar, not to easily
\nbe misled by foreign analysts' assessment of future political
\ndevelopments in Indonesia or risks in the country. (vin)<\/p>",
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