Market awaits concrete action from govt after MPR session
Market awaits concrete action from govt after MPR session
A'an Suryana, The Jakarta Post, Jakarta
While the government may be let down with the lukewarm response
of the financial market to the positive outcome of last week's
People's Consultative Assembly (MPR) annual session, analysts
said that foreign investors would continue to adopt a wait and
see attitude until there was more concrete evidence that the
government could resolve the various uncertainties plaguing the
country.
"The market's response is actually positive, but they need to
see more evidence," Citibank economist Anton Gunawan told The
Jakarta Post on Wednesday.
Last week, the MPR, Indonesia's highest legislative body,
approved several constitutional reforms which experts say will
put Indonesia on the right track towards democracy and help end
the unstable political and economic situation which has gripped
the country since the late 1990s following the downfall of former
authoritarian president Soeharto, and the regional economic
crisis.
The positive results of the MPR session, among others a direct
presidential election and the elimination of military
parliamentary seats to boost civilian control, has been applauded
by the international press, with editorials saying that Jakarta
is heading in the right direction.
But the positive international press coverage has not boosted
foreign investors sentiment in the country as reflected in the
rupiah and the local stock market.
This seems to disappoint the government.
"The market should have given a much warmer response," said
Mahendra Siregar, a staff member at the Office of the
Coordinating Minister for the Economy.
The rupiah only increased slightly to around the Rp 9,000
level during the past couple of days following the MPR session,
which ended on Sunday. The Jakarta Stock Exchange composite index
had also been hovering at around the 448 level.
Anton said although investors were heartened with the
violence-free and peaceful MPR annual session, investors still
wanted to see if the government could deliver pro-market economic
policies.
He said that investors were now waiting for the 2003 state
budget draft, which is expected to be delivered by President
Megawati Soekarnoputri on Friday.
"The government should exercise prudent macroeconomic policy
in the state budget."
The government may be tempted to adopt popular policy which
could further strain the state budget in hopes of winning the
2004 general election, some analysts have said.
Center for Information and Development Studies (CIDES)
economist Umar Juoro concurred, saying that to benefit from the
positive outcome of the MPR session, the government must continue
measures to revive foreign investors confidence including by
creating legal certainty, and resolving the widespread labor
conflicts.
"The government must continue measures to attract foreign
investors by pushing legal certainty and security assurance," he
said.
He said that foreign direct investment was crucial to help
push economic growth, which so far was mainly being driven by
consumer spending.