Fewer deregulatory measures expected ahead of elections

JAKARTA (JP): The government is unlikely to go on a deregulation spree in the next two years because it will be preoccupied with the May 1997 general election and its political agenda, economist Mari Pangestu predicts.

"I do not expect many deregulation packages with significant impacts on the business sector within the next two years," said Mari from the Centre for Strategic and International Studies (CSIS) on Friday.

She told a seminar on short and medium-term economic prospects that it was unlikely that policy makers would initiate many economic reforms.

"The policy makers will prefer to play it safe," she said.

Mari said the government would be cautious on introducing deregulatory reforms which might have unexpected consequences before the general election.

She said it was unlikely that the general election would impact significantly on the business climate or economic growth because the outcome of the balloting would mirror the previous election.

Indonesians go to the polls on May 29 to elect their legislators who will elect a new President in March 1998.

If there were any significant impacts on the domestic economy they would most likely be caused by external factors such as a world recession or declining oil prices, Mari observed.

Mari said the election would run smoothly because its outcome was predictable.

"To the business community, 1998 will be much more important because of the formation of a new cabinet in late March," she was quoted by Antara as saying.

Mari said rumors on the makeup of the next cabinet would be more important to businesspeople than the question of the next president and vice president.

Mari predicted there would be no major changes in the economy before 1998. This would be welcomed by those who have benefited greatly from the present state of affairs of business but it would irk those who had suffered from the high cost economy.

Mari predicted slower economic growth (7.5 percent) this year but invigorated economic growth in 1997 and 1998.

"The growth will remain high next year because the country's external environment will improve and the investment boom will start to bear fruit," she said.

She projected the growth would mainly come from construction, financial services, trade, hotel and restaurant industries.

The construction sector is expected to grow 15 percent next year, up from 11 percent this year; financial services by 10.5 percent, up from 10 percent; and trade, hotels and restaurants by 7.5 percent, up from 7.3 percent, she said.

Agricultural growth is expected to slow to 2.9 percent next year, down from 3 percent; manufacturing is expected to decline to 10.8 percent from 11 percent; electricity, gas and clean water should drop to 13.5 percent from 14.5 percent; the mining sector is predicted to remain flat at 5 percent, she said.

"All my projections are based on the assumption that the government will continue to make correct policies. And I do believe that the government will do it," she said.

The government's policy consistency was tainted this year when it introduced a controversial national car policy and imposed tariff protection on the upstream petrochemical products, polyethylene and polypropylene.(jsk)