CIDES warns Megawati of tough challenges

JAKARTA (JP): President Megawati Soekarnoputri still faces tough challenges ahead in fixing the country's severe economic problems, despite her success in obtaining strong international support, according to CIDES director Umar Juoro.

CIDES (Center for Information and Development Studies), is a private think-tank linked to former president B.J. Habibie.

"Although President Megawati's government has succeeded in winning the confidence of major international donors, it still faces many challenges that must be dealt with," Umar said during a monthly media briefing.

Megawati assumed power in July after lawmakers dismissed Abdurrahman Wahid for incompetence in dealing with the country's economic and political crisis.

Mega presented to the House last week the 2002 draft state budget which has been commended by many as the right step for helping to maintain macroeconomic stability and a starting point in consolidating the country's fiscal sector.

This was also followed by the decision of the International Monetary Fund early this week to disburse a US$395 million loan to the country, a vital element in winning other assistance from international lenders.

But Umar said that there were still many problems outside of the budget issue.

He pointed out that slow progress in the corporate debt restructuring program had been a major factor preventing investors from returning to the country.

"Foreign investors, thus far, have given a positive response to President Megawati's government, yet they are not willing to invest large amounts of capital, and are awaiting a more favorable business climate," he said.

The 1997 economic crisis drove many local corporations to near bankruptcy, rendering them unable to repay massive domestic and foreign debts.

The debt overhang has been a factor discouraging banks from channeling badly needed loans, analysts have said.

Umar said that other challenging problems included the government privatization program, and the disposal of assets under the Indonesian Bank Restructuring Agency.

He added that the possibility of a deeper global economic recession following the terrorist attacks on the U.S. would create bigger challenges for Megawati and her economic team in trying to restore the economy.(dmr)