Fresh hope for economy with new man at helm

Fresh hope for economy with new man at helm

Bhimanto Suwastoyo, Agence France-Presse/Jakarta

The appointment of a well-regarded technocrat to Indonesia's
embattled economic team promises greater unity of purpose and
policy, giving fresh hope for Southeast Asia's largest economy,
analysts say.

The country's economy has taken a hammering this year, with
soaring oil prices clearing out public coffers and pressuring the
rupiah as the government scrambled to keep paying out expensive
domestic fuel subsidies.

It hiked fuel prices by an average of 126 percent in October
but that resulted in a sharp spike in inflation and has stoked
fears of interest rates being cranked higher and a growth
slowdown.

In a reshuffle he promised would occur a year after he swept
to power as the country's first popularly elected president in
October 2004, Susilo Bambang Yudhoyono appointed U.S.-trained
Boediono as his economic team's head late on Monday.

Boediono, a finance minister under the previous government of
Megawati Soekarnoputri, was widely credited with stabilizing
Indonesia's economy after the disastrous Asian financial crisis
of 1997-1998.

"This is welcomed. It will be good for the economy, at least
in the short-term," economist Umar Juworo from private think
tank, the Institute for Development of Economics and Finance
(INDEF), told AFP.

The choice of Boediono, as well as macro-economic expert and
former Asia Pacific IMF director Sri Mulyani Indrawati as new
finance minister, provided "long-awaited certainty" and would be
good for markets, he said.

"The two share the same views on many things, including the
need for lower inflation and an equilibrium between fiscal and
monetary policies," he said.

Pande Raja Silalahi, a senior economist with another
think tank, the Centre for Strategic and International Studies,
also hailed the new economic line-up, saying they "really know
their field and share the same school of thought."

Stocks and rupiah early on Tuesday extended recent gains,
immediately reflecting the markets' welcome for the new cabinet,
dealers said.

The Jakarta Stock Market composite index opened 0.09 percent
higher at 1,121.630 while at 8:30 a.m. the rupiah was at
9,945/9,955 to the dollar, compared to Monday's of 9,955/9,960.

Allegations of vested interests held by the previous economic
team had been a top concern by investors, Silalahi said without
elaborating.

Critics have suggested that the outgoing economy minister,
businessman Aburizal Bakrie, may have been faced with conflicting
interests.

"With this new line-up, this worry is now gone ... I think one
can lay greater hope on this team than on the previous one,"
Silalahi added.

INDEF's Juworo warned that in the mid-term, the team may hit
coordination snags as the reshuffle was limited and ministers who
emerged unscathed may feel overconfident about their performance.

Silalahi also cautioned that two cabinet newcomers -- Paskah
Suzetta as national development planning minister and Erman
Suparno, as labor minister -- had unproven track records.

Sri Adiningsih from Gadjah Mada University said the new team
would be likely to coordinate policies with Bank Indonesia better
as Boediono and Indarwati "have quite good relations" with the
central bank where Boediono was a former deputy governor.

Political analyst Syamsuddin Harris, from the state Indonesian
Institute of Sciences, said the reshuffle showed that Susilo was
still constrained by political considerations.

"Political support remains a main consideration so that the
result is compromise. If it was a purely economic decision,
Aburizal Bakrie, if deemed to have failed in his duties, should
have been simply discharged, not moved to another posting," he
told AFP.