New government expected to maintain economic course

New government expected to maintain economic course

The Jakarta Post, Jakarta

Capital market analysts expect the new government, to be
inaugurated later this year, to continue with the current
economic policies at least as far as fiscal and monetary
stability are concerned.

Analyst Ferry Yosia Hartoyo of DBS Vickers Securities said on
Monday that foreign investors, by and large, hoped the new
government will maintain the economic reform programs that have
been laid out in the "White Paper" document to prevent new risks
to the economy.

"The economic programs of all the presidential candidates
already include much of what is stated in the White Paper.
Investors will recalculate their stance, however, if there are
any drastic changes in policy," said Ferry.

The White Paper contains a series of economic reform targets
the government must achieve in the 18-month period that began in
August 2003. It was produced after the government made the
decision not to extend the International Monetary Fund-sponsored
economic reform program, which expired at the end of 2003.

Among the key policies set out in the White Paper, are
measures aimed at achieving and maintaining fiscal and monetary
stability. The current government and the central bank have
actually been credited by international donors with stabilizing
the country's fiscal situation by cutting down the ratio of
public debt in the state budget deficit in relation to gross
domestic product. It also calls for stabilizing the monetary
indicators such as inflation and interest rates, both of which
skyrocketed in the wake of the late 1990s financial crisis.

However, critics have said that the current government failed
to take advantage of the positive sentiment in the wake of the
White Paper's release, because investment remains scarce due a
variety of negative factors, most notably legal uncertainty, a
key area in the post-IMF reform program that has not been
successful.

Ferry said that in the short term, the new government would
actually have a limited set of options, as they would have to
finish the programs set out in the White Paper.

He explained that such a continuation was needed since the
White Paper had become a policy anchor on which international
creditors and investors based their perceptions and calculations
of Indonesia's economic outlook and investment risks.

The head of the investment management division of Mandiri
Securities, Sutomo, agreed with Ferry. Sutomo pointed out that
the capital market players wanted a continuation of the current
economic programs, in a bid to prevent confusion and uncertainty
among investors.

"The market just will not stand for any confusion resulting
from a discontinuation of the current economic programs, as it
may jeopardize the current monetary and fiscal stability," said
Sutomo.

The five contesting presidential candidates (Wiranto, current
President Megawati Soekarnoputri, Amien Rais, frontrunner Susilo
Bambang Yudhoyono and Hamzah Haz) in the upcoming July 5 election
have all put economic recovery at the top of their agenda.

Stock analyst Hendra Bujang of Mega Access Securities said
that aside from continuing the current programs, the next
government should also focus on reviving the corporate sector, in
order to push more companies to list their shares on the stock
market, and to help the country to achieve higher, more
sustainable economic growth.