Market, analysts give thumbs-down to economic team

JAKARTA (JP): Analysts and the market gave a thumbs-down to President Abdurrahman Wahid's choice of new economic ministers, particularly the new Minister of Finance Prijadi Praptosuhardjo.

The rupiah immediately tumbled from a 3-month high of Rp 8,090 per U.S. dollar before the announcement of the new Cabinet to Rp 8,365 to the dollar in late trading on Wednesday.

"Prijadi is a problem because he did not even pass the central bank's fit-and-proper test," University of Gadjah Mada (UGM) economist A. Tony Prasetiantono said.

Prijadi, a close friend of the President, was a former director at state-owned Bank Rakyat Indonesia (BRI). The President had previously insisted that Prijadi be appointed BRI's president, but unfortunately he didn't pass Bank Indonesia's fit-and-proper test due to past mistakes he reportedly made at BRI.

But Abdurrahman immediately defended his choice on Prijadi. "I know him very well because I have observed him for more than 16 years," he said in reply to a reporter's question immediately after the announcement of the new Cabinet.

Prijadi will replace Bambang Sudibyo.

"I think Bambang is much better than Prijadi," Tony added.

He also questioned Prijadi's limited expertise in macro economic and fiscal issues.

"His background as a banker is not sufficient to hold the finance minister portfolio which requires fiscal expertise," he said.

Tony said that the new Coordinating Minister for Economic Affairs Rizal Ramli had sufficient "quality and economic expertise", but the problem was that a coordinating minister must be supported by a credible finance minister to help bring the country out of its economic crisis.

Rizal is currently Head of the State Logistics Agency (Bulog). He was previously an economic analyst and consultant.

Rizal will be assisted by Cacuk Sudarijanto, currently Chairman of the Indonesian Bank Restructuring Agency (IBRA), who was appointed as Junior Minister for Economic Restructuring in the new Cabinet.

Another UGM economist, Sri Adiningsih, said that the appointment of Rizal and, even more notably, Prijadi was against financial market expectations.

"The market doubts Prijadi's capability after he failed to pass a test even just to become the president of a bank," Sri said.

"Rizal Ramli is not welcomed by the market either. So there's a strong impression that Gus Dur (the popular nickname of Abdurrahman) is forcing his own will at the expense of the credibility of his Cabinet," she added.

Sri said that the government will be facing a formidable task in obtaining the market's confidence with the new economic team.

Megawati

Sri said the market also questioned the absence of Vice President Megawati Soekarnoputri during the announcement of the new Cabinet lineup.

The failure of Kwik Kian Gie, a confidant of Megawati, to be reappointed as the coordinating minister for economy, finance and industry, is seen by the market as a potential source of conflict between the President and Vice President.

Kwik, together with Indonesian Ambassador to the U.S. Dorodjatun Kuntjoro-Jakti, had been championed by the market to hold the top economic minister post.

Centre for Strategic and International Studies (CSIS) economist Pande Radja Silalahi said that individually the new economic ministers had the necessary expertise in their respective fields, although in the case of Prijadi there was a public image problem.

"But the question now is can the President or Vice President make them an effective economic team to resolve the country's economic crisis," Pande said.

The previous economic team had been criticized for their ineffectiveness and lack of team work.

"As for Prijadi, he must work hard to prove that he is capable. This will not be easy," Pande said.

Meanwhile, president of the Jakarta Futures Exchange (JFX) Hasan Zein Mahmud said that the appointment of the new economic ministers was a total disappointment to the financial market.

"In the short term, we may see the rupiah plunging. I wouldn't be surprised if it reached the Rp 10,000 level," said the former president of the Jakarta Stock Exchange (JSX).

Hasan said Rizal's appointment would not please the International Monetary Fund because he had recently recommended an overall review of the government's deal with the IMF.

The IMF is organizing a multi-billion dollar bailout to help the country finance its economic reform programs. The IMF is scheduled to disburse another US$400 million later this month.

Goei Siauw Hong, an analyst from Nomura Securities company, said the market was quite uncomfortable with the economic team, as can be seen from the fall in the rate of the rupiah immediately after the announcement.

"The absence of Vice President Megawati Soekarnoputri from the announcement ceremony also raised a big question, especially because she is supposed to manage the Cabinet," Hong added.

He said appointing Prijadi, who failed in April to pass a fit- and-proper test for the presidency of state Bank Rakyat Indonesia, as the finance minister "was too much".

"This simply means that President Abdurrahman stubbornly forced his will on the Cabinet," Hong said in a RCTI television broadcast.

Hong doubted the objectivity of what he considered a personal assessment by Abdurrahman of his friend, Prijadi.

'Black' conglomerate

Hong also cited Rizal's association with what he dubbed as a 'black' conglomerate, claiming that it was a negative factor that could affect his integrity in the market.

Rizal acted as a consultant for the Texmaco Group last November when the widely-diversified conglomerate faced a national controversy and charges of corruption in relation to the alleged abuse of $1.3 billion in government loans it had received in 1997 on the back of a strong recommendation from then President Soeharto.

Before his appointment as head the National Logistics Agency in April, Rizal was a founding director of an economic research agency, Ekonit, which he set up together with former Minister of State Enterprises Development Laksamana Sukardi, who disclosed Texmaco's alleged credit scam last October.

Analyst Sjahrir said he was not surprised by the new Cabinet line-up.

"What the President did was simply appoint his own men. The Cabinet is nothing but all the President's men," Sjahrir told the SCTV television broadcast.

He agreed with other analysts that the new finance minister, Prijadi, is the most contentious appointee, given his failure in April to pass a fit-and-proper test by the central bank for the presidency of Bank Rakyat Indonesia.

"But I reckon Gus Dur is not concerned about the finance ministry. What he thinks is at stake with the new Cabinet is the future of his presidential seat," Sjahrir added.

Rizal, Prijadi and Cacuk Sudarijanto, the junior minister in charge of economic restructuring seconded to Rizal, are all confidants of the President, according to Sjahrir.

"Cacuk will be very powerful if his area of responsibility includes the oversight of state enterprises and if he retains his current position as chief of the Indonesian Bank Restructuring Agency (IBRA)," Sjahrir added.

The new Cabinet no longer has a minister in charge of state enterprises and investment promotion.(rei/bkm/vin)