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.