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)