BI governor urges continuance of financial reforms

BI governor urges continuance of financial reforms

SINGAPORE (AFP): Indonesia's central bank governor said
Wednesday that the incoming president had to push ahead with
crucial financial reforms amid the arduous task of rehabilitating
the crisis-struck economy.

Bank Indonesia Governor Syahril Sabirin spoke to reporters
here hours before Abdurrahman Wahid was elected as the country's
new president.

"Whoever is the next president, I think we should work
together to continue with the economic program," Syahril said on
the sidelines of the World Economic Forum's East Asia conference.

"I think we should continue with the current program, the
thrust of which is restructuring the financial sector. In my view
the most important thing is continuing with the bank
restructuring program."

Incumbent B. J. Habibie dropped his bid for a new term after
receiving the equivalent of a no-confidence vote from the
national assembly.

His Golkar party also ended up without a candidate for the top
post, which saw a one-on-one contest between popular opposition
leader Megawati Soekarnoputri and Wahid, who is backed by a
coalition of Muslim parties.

Wahid, a 59-year-old clinically blind cleric whose economic
policies have not been publicized, beat Megawati 373 to 313 in
the vote count.

The Indonesian rupiah, which closed at 7,605 against the U.S.
dollar on Tuesday, rose past the key psychological level of 7,000
on Wednesday after Habibie's withdrawal from the presidential
race and Golkar's failure to field any candidate for the
presidency.

But it retreated to close at 7,550 in Singapore trading
Wednesday after reports of a bomb blasts and violence in Jakarta
following Wahid's election.

"A few more blasts like this and markets will be severely hit
again," warned Sani Hamid, analyst with Standard and Poor's MMS
in Singapore.

Sani said the markets had "overly anticipated a Megawati win
and forecast that the vice-presidential nomination on Thursday
would be closely watched and was "another potential market moving
factor."

Mari Pangestu, a prominent analyst on Indonesia's economy,
told the World Economic Forum conference here that the new
Indonesian president would face formidable challenges, including
resolving the Bank Bali scandal.

Habibie's government has been tainted in the run-up to the
election by the scandal over the payment of an 80-million-dollar
commission by troubled Bank Bali to a company linked to Golkar,
and a decision to drop a corruption probe of Soeharto, Habibie's
political godfather.

Mari said the new government would have to grapple with the
task of economic and financial restructuring, which would be
painful, and added that it would probably follow the
prescriptions of the International Monetary Fund.

She said the new administration might face difficulties, for
instance, when it came to lifting fuel subsidies and accelerating
bank restructuring and recapitalization, which were highly
charged political issues.

The IMF and the World Bank have for about a month suspended
crucial loan installments to Indonesia because the Bank Bali
scandal has not been resolved.

Chances of them lifting the aid suspension are now bright
following a Jakarta court's decision this week authorizing full
public release of a controversial report on the scandal.

But the World Bank's senior vice-president Joseph Stiglitz
told the conference here Tuesday that Indonesia needed stronger
economic reforms even with the best government in place if it
wished to quickly recover.

Syahril said Wednesday that based on latest estimates,
Indonesia's gross domestic product should be between zero to
minus one percent for 1999 as the economy recovered from
financial and political turmoil.

"If we can gather together all the forces, we can be
optimistic of achieving the 2000 growth rate of two to four
percent," he said.