Lack of political support blamed for economic woes
JAKARTA (JP): A senior economist on Wednesday blamed failing political support for the government's coalition cabinet as being the main factor in the deterioration of the country's economic recovery process.
Noted economist and head of the National Economic Council (DEN) Emil Salim said that Indonesia's economic recovery was already on the right track before political pressure against President Abdurrahman Wahid mounted.
"In coalition cabinet, all parties should be supportive. But now even the parties' leaders prefer to criticize it," Emil told reporters on the sideline of a business gathering held by PT Jakarta Industrial Estates Pulogadung.
He referred to Abdurrahman's coalition cabinet, which is comprised of political parties that have brought him to the presidency.
Emil, who served several ministerial posts under former president Soeharto, was one the front runners of the reform movement, which helped topple the former authoritarian leader.
According to him, Indonesia showed improvement in its fundamental economy during the first six months after the election of President Abdurrahman.
"Only since April have things started to get messy," he said.
He referred to the replacement of two senior economic ministers, Laksamana Sukardi and Yusuf Kalla, both of whom represented two leading political parties in the coalition cabinet.
Politicians criticized the replacement as efforts by the President to strengthen his political position. Abdurrahman, more popularly called Gus Dur, defended the move saying that the two ministers were replaced because they could not cooperate with the other ministers.
The market has responded negatively to the cabinet friction, as the rupiah plunged to its record low since President Abdurrahman took office last October.
However, Emil added, Indonesia's democracy was only months old, so that political discords were bound to occur.
Asked whether the central bank should intervene to stop the rupiah from further dropping, he advised against it.
Emil said that since political uncertainties triggered the rupiah's drop, any economic measures would be useless.
"Give the market stability," Emil said.
Consolidating the cabinet and ironing out any frictions were key factors the government should work out in order to regain market certainty and stability, he said.
According to Emil, the political consolidation should take place before August when the President will give his accountability speech before the People's Consultative Assembly.
He said the signing of the Letter of Intent (LOI) on Wednesday should be a sign to the market that Indonesia's economy is heading in the right direction.
The LOI, an agreement between the government and the International Monetary Fund (IMF), was signed on Wednesday,
It contained economic terms to be followed by Indonesia for the disbursement of the Fund's financial bailout.
He said when the Fund decided to postpone the disbursement of some US$400 million to June it was because the government failed to fully comply with the LOI.
Emil said that businessmen frequently asked the government where the economy was heading too, while the LOI was already showing a clear economic direction.
He said the market had also acted confused over mounting calls to peg the rupiah, which the LOI rejected.
"I say your guideline is what's stated in the LOI," he said.
He added that the signing of the LOI should provide calmness to the market and help strengthen the rupiah.(bkm/07)