Economy amid political crisis

There is good reason for the market to weather the next two months of heightened political uncertainty with a lesser sense of foreboding despite the potentially explosive situation and the ongoing leadership crisis. Though the House of Representatives has given a vote of no confidence in President Abdurrahman Wahid -- making his government a lame duck and a new government widely expected after the Aug. 1 Special Session of the People's Consultative Assembly (MPR) -- there are strong indications that the ailing economy will not be entirely cut adrift.

The first factor, which reassures us that the potentially disruptive period until August will largely be kept under control without new grave incidents or violence, is the increasing self- confidence and professionalism on the part of the National Police and the military.

The highly professional manner and cool-headed tactics with which the security forces acted to avert major incidents during the massive demonstrations by Abdurrahman's supporters before and during the House plenary session on Wednesday assures us that the next turbulent period would most likely pass without devastating violence.

The surprisingly relative calmness, despite repeated threats of massive violence, is quite reassuring to businesspeople, indicating that they will be able to conduct business as normally as possible in the specially vulnerable circumstances Indonesia is now mired in.

Even though foreign investors will remain on the sidelines, waiting for the resolution of the leadership crisis, the favorable developments over the last few days should convince businesspeople overseas to continue trading deals with Indonesia. Foreign tourists also will not likely wipe the country completely off their list of destinations.

The ability to maintain law and order will undergo its most severe test, especially within the next two months, when the last round of the political battle between the President and legislative body will take place and threats of massive demonstrations and worker revolt will be greatly pervasive with the plans to raise fuel prices and electricity and telephone rates later this month.

It is also comforting to note that the House, after a rowdy, marathon plenary session on Wednesday, immediately resumed on Thursday its legislative duties related to the state budget. Irrespective of the vote of no confidence in the President, the House finance and budget commission resumed deliberations with finance minister Prijadi Praptosuhardjo on the planned amendments to the 2001 state budget.

This assures us that despite the differences between the House and the President they remain united and cooperative with each other when it comes to the nation's interests.

We are now confident that even though the national political agenda will likely be dominated by preparations for the upcoming MPR Special Session, the House, the members of which also make up 500 of the MPR's 700 members, together with the government will push ahead with the economic reform agenda to strengthen the budding recovery.

This collaborative stance is quite pivotal because there are several reform measures, already far behind schedule, that have to be approved shortly for implementation. Among them are the planned amendments to the state budget and the central bank law.

The budget amendments are especially quite urgent as the fiscal year is already in its second half. Further delays would make the special measures less effective in achieving the targets set in the budget amendments, thereby threatening the government with an unmanageable fiscal deficit with its devastating repercussions on the macroeconomy.

The government-proposed amendments to the central bank law also requires immediate completion to dispel any doubt about the political independence of Bank Indonesia that has been stipulated in the 1999 central bank law.

Few would argue the vital importance of an independent, autonomous central bank, especially now amid the political uncertainty and leadership crisis. This independence will assure the business community and the general public that the monetary sector will not be vulnerable to short-term political interests.

So all in all despite the turbulent political condition, we can still rest assured that the decision-making process in the economy, which directly affects the common people, will not stall but will continue to run, although perhaps not as full-fledged as needed to cope with the economic crisis in view of the leadership crisis.