Conflicting signals contribute to uncertainty: Minister

Conflicting signals contribute to uncertainty: Minister

The Jakarta Post, Jakarta

The rupiah's recent slide was attributed in part to declining
market confidence in the prospects for the economy, with
persistent conflicting signals from the government exacerbating
uncertainty, a minister said on Monday.

State Minister for National Development Planning Sri Mulyani
Indrawati said the government had come to realize that it was not
going to be easy to achieve all the economic targets it had
pledged it would achieve, given the complexity of the problems
being confronted by Indonesia.

"From day one, the government has given the strong impression
that we are aiming for very strong growth," she told a seminar
attended by leading newspaper editors from Asia and Europe and
organized by Singapore-based Konrad Adenauer Foundation in
cooperation with The Jakarta Post.

She went on to say that the government had said that it needed
to first work on improving the investment climate.

However, the government realized that it was much easier said
that done to overcome the long-chains of bureaucracy, rampant
corruption, ailing infrastructure and so on, she said.

The government has laid out ambitious economic targets for
this year and the next four -- and all depend heavily on the
revival of foreign investment lured by expected fast improvement
in the country's business and investment climate.

However, with investment yet to fully pick up, the country has
to weather a storm caused by a rapid surge in oil prices,
currently hovering at above US$70 a barrel. This has put pressure
on the already cash-strapped state budget as it has to allocate
more funds for the fuel subsidy.

Having been a net oil importer for the past several months,
the country has to find huge sums of American greenbacks to
finance its oil imports. State oil and gas firm PT Pertamina
admitted recently that at current oil price levels, it had to
spend about US$1.6 billion per month to import oil, both crude
and refined.

Last week alone, the rupiah lost close to 5 percent of its
value. On Monday it closed at 10,840 to the dollar -- the lowest
level since September 2001. Riding the downward momentum was the
Jakarta Composite Index, which fell by a staggering 5.16 percent
on the day to close at 994.77 -- the first time this year that it
has closed below the 1,000 point level.

In spite of all the negative sentiments, Sri Mulyani said the
government intended to restore market confidence by strengthening
the country's fundamentals.

"Indonesia will work on the fundamentals, rather than taking
shortcuts, which will just create more problems," she said.