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)