Indonesia seen crucial to recovery in SE Asia

Indonesia seen crucial to recovery in SE Asia

CANBERRA (Reuters): Thailand's former commerce minister Narongchai Akrasanee said yesterday that Indonesia was crucial to economic recovery in Southeast Asia but added it would take at least two years for the region to get back on its feet.

"When you're talking about the region, Indonesia is the major country now," Narongchai told Reuters in an interview.

"I think Thailand and Malaysia can come out of it in two years, but if Indonesia doesn't come out of it quickly then it would affect the whole region. If things in Indonesia come under control, then I think two years."

Indonesia is suffering its worst economic crisis in decades, with the collapse of the rupiah and drought causing food prices and unemployment to soar. The economic slump has sparked riots, often targeting the ethnic Chinese who control most of the commerce in Indonesia.

Narongchai, in Australia for a regional exporters' conference, criticized the International Monetary Fund's strict package for Indonesia, saying it could aggravate social unrest and lead to further riots.

The "politically unsuitable" package should be changed to take account of the country's social problems, he said.

"I am hoping the international community and major industrialized countries can do something to help Indonesia (by) revising the IMF package in such a way that the fiscal position will be more accommodating to the local problem."

"The IMF is putting too much pressure on the Indonesian government to cut the budget. The government actually needs the money to take care of the people and I'm afraid the IMF will not agree," he told Australian Broadcasting Corp radio earlier.

The IMF has provided a US$43 billion financial rescue package for Indonesia, aimed at stabilizing its economy, but President Soeharto's commitment to the reform conditions is in doubt.

Narongchai said instability in Indonesia would be detrimental to the region's security, and agreed Australia's own review of its regional security strategies was important.

The Indonesian crisis has prompted Australia to review its strategic policies, which were based on an economically booming Asia and a stable Indonesia acting as a buffer to the north.

"Indonesia is the most important country in Southeast Asia. Because of peace and stability in Indonesia during the last 30 years, we have been able to build up this ASEAN (Association of South East Asian Nations) community...and everybody has been able to prosper," Narongchai said.

"The region cannot afford to have chaos in Indonesia -- definitely not."