Analysts welcome Boediono's return

Analysts welcome Boediono's return

Urip Hudiono, The Jakarta Post/Jakarta

Analysts have welcomed the likely comeback of former minister of
finance Boediono to the Cabinet's economics team.
They said on Friday his proven track record as the architect of
the country's return to a brief period of macroeconomic stability
after the 1997 financial crisis was just what the beleaguered
economy needed.

Markets also greeted the news positively, with the Jakarta
Stock Exchange Composite Index rising by as much as 2.1 percent
to 1,119.417 on Friday and the rupiah strengthening to Rp 10,005
against the U.S. dollar, from Thursday's Rp 10,033.

The currency even rallied to an intraday high of Rp 9,990 to
the dollar, after President Susilo Bambang Yudhoyono announced in
Medan, North Sumatra, he had invited Boediono to join his
Cabinet's economics team, as part of a "limited reshuffle" to put
the recently unsatisfactory macroeconomic management back on
track.

Economist Kahlil Rowter of Mandiri Sekuritas told The Jakarta
Post that, if Boediono joined the economics team, the economy
would have a greater chance of picking up as he was known for his
successful maintenance of fiscal stability during his term.

"He is well respected in economic circles -- both in the
country and abroad -- for his calm and careful attitude in
getting things accomplished," he said.

Standard Chartered economist Fauzi Ichsan, meanwhile,
emphasized Boediono's extensive experience, notably "in working
together with the central bank and House of Representatives".

Boediono, who served as finance minister from 2002 to 2004, is
credited for having been able to consistently reduce the state
budget deficit, working with the central bank in maintaining
macroeconomic stability in terms of inflation and interest rates,
and delivering Indonesia out of an International Monetary Fund
(IMF) program.

Before becoming finance minister, Boediono had served as head
of the National Development Planning Agency (Bappenas) and Bank
Indonesia (BI) deputy governor.

Indonesia's economy recently experienced a growth slow down to
5.34 percent, amid an inflation reaching 18.38 percent and
interest rates of 12.25 percent, after the government increased
domestic fuel prices on Oct. 1 as soaring global oil prices
threatened the state budget's sustainability.

Kahlil, however, suggested that Boediono should serve as
finance minister, considering his track record, rather than as
coordinating minister for the economy.

"I think his experience as chief economics minister would be
questionable, especially when the real sector currently needs
breakthrough policies, while Boediono is known for being a
careful policymaker," he said.

He also criticized Boediono's "legacy" of setting a too low
oil price assumption in the 2005 state budget and postponing
cash flow payments to state oil and gas firm PT Pertamina and
state utility company PT PLN for budget prudence purposes, which
may have contributed to this year's economic problems.

"So there's pluses and minuses for Boediono," he said. "He is
good at maintaining fiscal stability, but maybe not at making
stimulating economic policies."

Meanwhile, Fauzi warned of a possible negative market reaction
if it turned out Boediono was not appointed finance minister or
chief economics minister as has been expected.

"Boediono must be given strong fiscal authority. Some in the
market have even suggested him for both (finance and economics
minister)," he said.