Economy worsens, reshuffle won't help: Economists

Economy worsens, reshuffle won't help: Economists

JAKARTA (JP): Last week's outrageous riots have severely
damaged Indonesia's economy, and a mere cabinet reshuffle will
have little impact on the recovery process, economists said
yesterday.

"It is a devastating catastrophe... the unrest has caused our
economic system to collapse," Laksamana Sukardi told The Jakarta
Post yesterday.

Laksamana, a director of Econit advisory group, said the riots
had disrupted upstream and downstream activities.

"There is no flow from production to service, we may face a
shortage in food supply," he said.

Jakarta was rocked by three days of rioting which started on
Wednesday, during which crowds vandalized cars and buildings and
went on looting sprees in shops and shopping malls, some of which
they set fire to.

This prompted a massive exodus of expatriates and ethnic
Chinese. The latter are frequently the target of angry mobs
during periods of social unrest.

Laksamana said the departure of expatriates would paralyze the
operation of multinational companies here, while the flight of
the ethnic Chinese would hamper the distribution of goods because
they control a large part of the retail sector.

Umar Juoro from the Center for Information and Development
Studies, a think tank affiliated to the Association of Indonesian
Moslem Intellectuals, said the crisis was deepening and it might
take as long as three months just to return to the conditions
immediately before the riots.

"The (economic) recovery will not only slow down but also lose
its momentum," Umar told the Post.

Both the economists forecast that inflation this year would
reach as high as 100 percent. The International Monetary Fund
(IMF) initially forecast an inflation rate of 47 percent.

Economic growth this year may drop as low as minus 10 percent,
considerably lower than the official projection of 4 percent.

They said President Soeharto's decision to reshuffle his
cabinet, in a bid to comply with growing criticism directed at
some of his ministerial appointments, would be unlikely to
restore confidence in the government.

"It's a good move, but it's too late," Laksamana said.

"We had chances to restore confidence six months ago, but they
were all wasted," he said, citing the General Session of the
People's Consultative Assembly (MPR) in the March and the
subsequent selection of a new cabinet as examples of wasted
opportunities.

The current cabinet consists of Soeharto's daughter Siti
Hardijanti Rukmana and his long-term friend Mohamad "Bob" Hasan,
among many close associates.

I Nyoman Moena, former Bank Indonesia director, said the
reshuffle would restore confidence only if the government
established a credible cabinet line up.

"If the people see a government free of nepotism and
collusion, it may regain the support of the nation," Moena said.

But both Umar and Laksamana said they remained skeptical that
any new faces brought in would gain the trust of the whole
nation.

"Those who are credible and have vision will stay away from
the regime because they will be buried," Laksamana said.

"They will not want to be seen taking sides against the
people," Umar said.

Laksamana said the current "obsolete government" needed total
regeneration.

He said the national leaders must show their sincerity to see
through thorough reforms without dwelling too much on the issue
of constitutionality.

"Change must be facilitated by our leader, be it through
stepping down or through constitutional changes."

"But without any sincerity, we will be dragged further into a
bottomless abyss," Laksamana said.

Umar said the reshuffle must be followed by complete political
reform, including reselecting MPR members, many of whom are
linked with nepotism, and a peaceful leadership transition
through an extraordinary session of the MPR. (das)