Group warns of new crisis if political conflicts continue

Group warns of new crisis if political conflicts continue

JAKARTA (JP): The Econit Advisory Group warned on Tuesday that
Indonesia could plunge into a deeper economic crisis if the
country's warring political sides did not end conflicts.

Econit's managing director Rizal Ramli said on Tuesday it was
only through the establishment of a solid government under a
power-sharing mechanism that potential political conflicts could
be reduced, enabling the government to work out the country's
ailing economy more effectively.

"Indonesia will fall into a second economic crisis period with
a more severe impact on the country, which would include
demonstrations, violence, negative economic growth and massive
unemployment, if prostatus quo groups win (the next General
Assembly and presidential election sessions) and set up a
nonreliable government," he said.

The predicted second crisis would last for around two years,
during which Indonesia would face anarchy and possible
'balkanization' in its territory due to religious and economic
pressure, he said.

Rizal warned that foreign countries might not be so eager as
they are at present to help bail Indonesia out if it plunged into
a second crisis because of an internal war of political interest.

"Thus, Econit is asking political elites to stop brawling and
flirtatiously competing over power. It will only make people feel
disgusted. They should start creating a political consensus to
enable the establishment of a new stabilized political platform,"
he said.

He lambasted the current government and political elites for
wasting time they should have used to further restore the
country's economy by shaping the conflict of interests among them
instead.

He said that the country's deteriorated economy showed some
good indications toward a more stabilized condition during the
first half of this year.

He said the country saw strong indications toward deflation,
the strengthening trend of the rupiah, the resurrection of the
index market and the bank interest rate's tendency to decrease.

"But, the good signs in the financial indicators do not
necessarily mean that Indonesia's economy has started to recover.
The current financial indicators are still pretty much fragile to
any economic, social or political issue," he said.

Rizal said the insubstantial condition of the economy was
proven when the rupiah was easily rocked by the Bank Bali
scandal.

The scandal erupted in late July after banking law expert
Pradjoto revealed the commission of Rp 546 billion (US$73 million
at current rates) paid by Bank Bali to PT Era Giat Prima for
assisting the bank to recoup some Rp 904 billion in interbank
claims on liquidated Bank Dagang Negara Indonesia (BDNI).

Rizal said the current stability trend in the economy was
actually dilapidated because it was not supported by solid
economic and political reformation.

"The rupiah will likely continue to weaken until the end of
the year if the government does not immediately guarantee
security and political stability," he said. (cst)