Economic rescue depends on polls, Ginandjar says

JAKARTA (JP): A strong foundation for economic reform and a successful general election are critical for Indonesia to achieve an economic recovery by 2000, according to Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

Speaking on Friday at the meeting of the world's economic leaders in Davos, Switzerland, Ginandjar said that despite recent progress in various economic indicators, the economy was still in a fragile state due to the large unemployment and social distress resulting from the 18-month-old economic crisis.

He added it would be even more unfortunate for the economy if the social tensions resulting from the political transition "intermingled with the social problems that have been generated by the ongoing economic crisis."

"Our economic strategy for 1999/2000 therefore, while setting a firm basis for overall recovery, needs to ensure the success of our general elections and the peaceful transition to an era of democratically elected governments.

"We expect that from the year 2000 on we will regain our growth momentum, and by the year 2003 our economy will be growing again at the level we had been accustomed to in the past, around 5 to 7 percent," he said in a written speech, a copy of which was made available to The Jakarta Post.

Indonesia plans to hold a general election in June and a presidential election in November.

The parliament last week passed three political laws, which will be the foundation for the elections expected to be the first democratic elections in forty years after the tumble of former president Soeharto last year.

Meanwhile, in an interview with Dow Jones Newswires, Ginandjar said he believes the rupiah may well be stronger than Rp 7,500 against the dollar in the next fiscal year, largely due to the passage of election laws.

Ginandjar noted that the target level of Rp 7,500 per dollar in the budget "was a rather conservative projection."

Ginandjar said that the passage of elections laws last week would help boost confidence that elections will take place on schedule, in turn increasing economic confidence and allowing for a stronger rupiah.

"We think confidence will return (in the next year), and the economy will get a bit better," he said.

Worries

Worries over whether the country could have a peaceful political transition increase as bloody riots and unrest continue to grip the country.

Concerns over the country's consistency with the painful economic reform program have also emerged following the parliament's strong criticism of the costly bank recapitalization scheme.

Ginandjar said he expected a rough ride in parliament but said passage of the budget bill was crucial.

"It is a prerequisite for our economy's recovery. For the economy to recover, it needs the recovery of the private sector and only the banks can help the private sector," he said.

The country's major foreign lenders grouped in the Consultative Group on Indonesia (CGI) have recently stressed that the international community will only provide further financial support if Indonesia remains committed to the economic reforms.

"We recognize that our efforts to revive the economy will only succeed if there is a supporting international environment," Ginandjar said.

The government has to work hard to secure some US$5 billion in foreign loans to finance the 1999/2000 budget deficit which is estimated to reach $10 billion.

Ginandjar said he remained confident that the country would get the $5 billion in funding it still needs from Japan, the World Bank and the Asian Development Bank.

He said he would meet later Friday with Japanese Vice Minister of Finance Eisuke Sakakibara and said that among topics of discussion would be Japanese funding for the Indonesian budget.

"It will be a meeting between old friends, but we will discuss support," he said.

Ginandjar said he didn't expect formal funding approval from Japan or the other lenders to come until the next Consultative Group meeting on Indonesia, to be held in Paris in August. But he added that he was convinced the needed funds would be delivered.

The government will need a large amount of the foreign loans to finance the bank recapitalization program, which will cost the 1999/2000 fiscal budget some $4.5 billion. Further funds will be needed to finance the social safety net program, costing $3 billion for the first fiscal year starting in April.

Ginandjar added that it was important to maintain spending on development projects, to create domestic demand and provide employment.

He also said that "creative solutions" for the country's corporate debt restructuring process was another key for the recovery.

Indonesia's private sector debt totals $80 billion. Most foreign lenders and local debtors are still in a deadlock situation over how to restructure the debts. (rei)