Leadership change 'not the answer to economic woes'

Leadership change 'not the answer to economic woes'

JAKARTA (JP): Coordinating Minister for the Economy Rizal
Ramli asserted on Wednesday that a change in national leadership
was not the answer to the country's economic problems because
such a change would not secure "minimum political stability."

"What we need is not that (a change in national leadership),
but minimum political stability," Rizal told a seminar on the
economy held by the National Defense Institution (Lemhanas).

"If there is minimum political stability and legal certainty,
whoever the leader may be, I'm sure Indonesia can come out of the
economic crisis quickly and become one of the great nations in
the region," he added.

Rizal warned, however, that achieving political stability via
the old military approach as occurred during the 32-year rule of
former authoritarian president Soeharto would be detrimental and
costly to the country.

Several top economists have earlier insisted that resolving
the country's economic problem is only possible if the embattled
President Abdurrahman Wahid steps down, and hands over power to
popular Vice President Megawati Sukarnoputri.

The pressure for Abdurrahman to step down has intensified
after the House of Representatives issued a second censure
against the President on April 30 over alleged involvement in two
financial scandals and his incompetence in governing effectively.

Reports said that Abdurrahman, Megawati and a team of seven
senior ministers, including Rizal, have been engaged in serious
talks to seek a "compromise" to resolve the national leadership
crisis.

The political crisis has contributed to the drop in the value
of the rupiah against the U.S. dollar and rising domestic
interest rates, which in turn threatens the 2001 state budget
deficit by reaching a critical level of up to 6 percent of gross
domestic product (GDP), compared to the initial projection of 3.7
percent of GDP.

The government may also have to cut down its earlier economic
growth forecast for this year to 3.5 percent from 5 percent. The
economy contracted by 14 percent in 1998, registered a relatively
flat growth in 1999, and grew by 4.8 percent last year.

Meanwhile, Abdurrahman has been quoted as saying that if he
stepped down, the country's political condition might worsen with
the strong likelihood of national disintegration.

"The problem is politics ... If we can't resolve the crisis of
confidence (in the current government), the economic problem can
not be resolved," said top political economist Didik Rachbini,
who is also one of the speakers in the seminar.

Didik said that one way to restore confidence in the
government was for Abdurrahman to rebuild a coalition government,
although he admitted that it would now be a very difficult task
after the President himself dissolved his previous coalition
Cabinet.

He said that forming a coalition government was crucial for
the survival of a President under current political conditions
where his party commanded only 11 percent of the 500-seat House
of Representatives.

But Rizal insisted that it would be useless for the President
to appoint ministers from opposing political parties if the
parties did not support particular ministers as happened during
the early months of the administration of Abdurrahman in late
1999.

"I agree with the suggestion to form a coalition, but the
appointed ministers must deliver and their parties must support
their policies," he said.

Meanwhile, Bank Indonesia deputy governor Miranda Goeltom, who
also addressed the seminar, said that the central bank had to be
consistent with its monetary policy to help maintain confidence
in the economy as developments in other fronts, particularly
politics, had been discouraging.

Miranda said that Bank Indonesia had to maintain its tight
monetary policy, by allowing the interest rate to continue to
increase due to high inflationary pressures from imports and the
weakening rupiah amid domestic political uncertainty.

"Of course, there will be costs that we have to bear (larger
interest costs to the state budget), but we should try to
minimize the cost," she said.

The benchmark interest rate of Bank Indonesia SBI notes
increased again on Wednesday to 16.26 percent from 16.06 percent
previously.

Analysts have said that the continuing increase in the SBI
rate is threatening the country's weak banking sector and causing
heavier burdens to the state budget, which covers the interest
charges of massive government bonds issued to finance the
recapitalization of domestic banks. (rei)