'Change in leadership effective medicine for economic malaise'

JAKARTA (JP): Former top economic ministers stressed once again on Wednesday that a resolution of the country's political problems would be the most effective medicine to the current economic ills.

They suggested that this could either be in the form of the resignation of President Abdurrahman Wahid or a massive reshuffle in the current cabinet.

"The root of the (economic) problem is in the political field," said former coordinating minister for the economy Kwik Kian Gie during a discussion, which was also participated in by former finance ministers Bambang Sudibyo and Frans Seda.

Kwik said that whoever the president would be, he or she must accommodate the powerful factions at the House of Representatives by forming a coalition cabinet. This would secure the support of the House due to the non-existence of a single majority political party.

"If the president and cabinet are credible, then the economic problems (can be) settled ... Because the concept is already clear," he said, pointing to the economic reform measures proposed by the International Monetary Fund.

The discussion was held after Gus Dur, as Abdurrahman is popularly called, was issued a second memorandum of censure on Monday by the House over two financial scandals, which may lead to the impeachment of the country's first democratically-elected president.

The intensifying political rift has created new pressure on the domestic economy which is still recovering from the 1997 crisis.

The rupiah dropped to a 31-month low of around Rp 12,300 per U.S. dollar last week in the run-up to the second censure. Bank Indonesia's benchmark interest rate soared to an alarming level of more than 16 percent, threatening the current state budget to suffer a dangerous deficit level of up to 6 percent of gross domestic product (GDP), compared to the initial projection of 3.7 percent.

"The political problems must be resolved first," said Bambang.

Bambang said that the country needed a new credible president and cabinet team to be able to create macroeconomic stability, which he said was the crux of the economic problem as reflected in rising inflation, weakening currency, and higher interest rates.

"The economy will stabilize when we have a credible leader ... If not, people will have no confidence," Bambang said, adding that Gus Dur and his cabinet team no longer had the necessary credibility.

Kwik and Bambang were part of Abdurrahman's first cabinet team. Kwik resigned last year after 10 months in office, while Bambang was among the top ministers dismissed by the President in a much-criticized cabinet reshuffle last year, that led to the current political fighting between Gus Dur and the House.

Kwik is a senior official of Vice President Megawati Soekarnoputri's Indonesian Democratic Party of Struggle (PDI-P), the largest party in the House, while Bambang is from the National Mandate Party (PAN), which helped sponsor Gus Dur to the presidency.

Calls have been mounting for President Abdurrahman to step down to allow Megawati to lead the country, which is now facing the threat of disintegration amid religious and ethnic clashes in certain regions and separatist demands from resource-rich provinces.

Bambang said that Gus Dur had failed to resolve the country's social and security problems.

"Megawati performs better in this field ... compared to her boss," he said.

"If a president in Indonesia can resolve the issue of national unity, he or she has actually resolved 80 percent of the country's problems," he added.

Bambang said change in the country's leadership was also crucial to maintain the support of international donors.

"The prospects of obtaining the CGI loan are now getting slimmer due to domestic political uncertainty," he said, referring to the Consultative Group on Indonesia, which groups Indonesia's international lenders, which last year pledged some US$4.8 billion in loans to help finance the current budget deficit.

Meanwhile, Seda said that the country was now facing a multidimensional crisis that could only be overcome by resolving first the political, social and security problems.

"We need strong leadership now," he said, adding that this could only exist if the House supported the government.

Seda said that if the current "political impasse" continued, economic problems would deepen. "The rupiah can tumble to as low as Rp 20,000 per dollar," he cautioned. (rei)