CIDES warns Megawati of tough challenges

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)