Cabinet delay frustrates market

JAKARTA (JP): Further delays in the Cabinet announcement frustrated the market and tempered optimism of a competent economic team, as suspicion grew of intensified politicking undermining the team's capability, economists said on Thursday.

Economist Faisal Basri said the ongoing delay was a strong signal that political parties, vying for seats in the Cabinet, had intensified their lobbying.

"People have started to wonder how a solid team can emerge under these circumstances," he told reporters.

After two weeks since her induction, President Megawati Soekarnoputri has yet to announce her Cabinet.

A Thursday meeting with leaders of political parties, which backed her presidency, failed to end in agreement over the Cabinet lineup.

President Megawati was expected to announce the Cabinet either Friday or Saturday, but postponed it until next week for reasons that are, so far, unclear.

Political analysts have said Megawati wanted to ensure her Cabinet would receive broad political support by opening doors for compromise.

"If the principle applied here is to accommodate everyone's interests, not everyone can be satisfied," Faisal warned, adding this could lead to more infighting within the Cabinet.

He said that if parties that favor political compromise were given positions in the new Cabinet it could muffle critics against the new government.

"This is political collusion, where everyone shuts their mouths, eyes and ears," he explained.

Faisal added that, even if core members of the economic team were credible and experienced professionals, it would be meaningless if other ministerial posts fell victim to political compromise.

"You can cripple a good economic team, if say, the Ministry of Industry and Trade, the forestry ministry and the agriculture ministry fall into the hands of political parties," Faisal said.

Confidence of a competent economic team has kept the rupiah from falling amid strong corporate demand for the U.S. dollar.

But as President Megawati's indecisiveness has lingered, so the market's optimism has waned. The rupiah closed on Thursday trading down at 9,640 compared to 9,630 the day before.

The Jakarta Stock Exchange Composite Index made a hefty loss, ending the day down 1.5 percent at 436.41 from 443.19.

Economist Pande Silalahi questioned how long market optimism could prevail given President Megawati's slow performance.

He said that as long as she could bring out a credible economic team, the market would not mind the long wait.

Commenting on the Cabinet lineup, he said it was unlikely Megawati would assign ministerial posts to all the best economists in her party, the Indonesian Democratic Party of Struggle (PDI-P).

Some of the economists should remain behind the stage to become Megawati's economic think tank.

"If everyone is out on the front, who is guarding home?" he said.

According to him, President Megawati will probably retain Kwik Kian Gie as her economic advisor to discern input from her economic team.

Legislators and politicians also expressed their concerns over the impact that the Cabinet delay would have on the market.

Akbar Tandjung, speaker of the House of Representatives, admitted that he and his Golkar Party did not know the reasons behind President Megawati's decision to defer forming her Cabinet, but said this could receive a negative response from the market and raise negative speculation about her new government.

"We suggested that the Cabinet lineup be announced this weekend, amid the market's positive response to the new government; but the President has decided to do it next Thursday, for reasons that are unclear," he said, after a meeting of party leaders.

Akbar said the urgent task for the new government was to stabilize the rupiah's exchange rate to win the confidence of domestic and foreign markets in Indonesia's economy.

"We fully support Megawati's government and we hope the market will not raise negative sentiments against it," he said. (bkm/rms)