Economic rescue depends on polls, Ginandjar says

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)