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.