Now the challenges

The political and social stability ushered in with a new government led by two respected, popular figures is predictably moving rallies from the streets to the foreign exchange and stock markets. Businesspeople foresee an immediate end to the violent outbursts in several cities of the past few days and expect a clean break from the corrupt past.

It is obviously too early to judge the capability of the Abdurrahman Wahid-Megawati Soekarnoputri government in coping with the crippled economy. Their Cabinet has yet to be formed and it is expected to be a long, delicate process of power-sharing negotiations to accommodate the interests of the various political factions in a bid to soothe political tensions. But the new administration possesses fundamental assets which the previous one did not have -- legitimacy, credibility and no relationship to a legacy of corruption and abuse of power. What all this boils down to is trust, the powerful working capital in coping with the mammoth challenges ahead.

It is redundant to caution that the postelection euphoria will be short, with the honeymoon probably lasting only one or two months before the pains of the economic debacle begin to assault the popularity and credibility of the administration, with high expectations of the people beginning to sour.

The first acid test of its credibility will be the new Cabinet, which is expected to be formed within the next few days. As both President Abdurrahman Wahid and Vice President Megawati have no previous experiences in government and the crisis they are dealing with is multidimensional in nature, they need a solid, professional working team.

Whatever political debts both leaders owe in bringing them to their present top posts, they should stand firm in imposing integrity and technical competence as the primary requirements for recruitment to the Cabinet. Too much attention to the political affiliations of the candidate, although good for gaining cooperation from the various political parties, would give the wrong signal to the market, especially if the need for returning political favors leads to the formation of a larger Cabinet. A Cabinet that is tightly fettered by the competing interests of political parties is inimical to jump starting the long, arduous process of building up good governance. Such a coalition may also compromise the House of Representatives' courage to exercise effective control of the government.

But early indications are convincing. It is really comforting to learn that President Abdurrahman's agenda on Friday, only his second day in office, included a meeting with several economists. This clearly proves his correct sense of priorities and his mastery of the right approaches to problem solving -- listening a lot before making any decisions. Similarly impressive is the proper sense of priorities shown by the vice president, as can be concluded from the off-the-cuff remarks made by Megawati on Wednesday. A few minutes before the presidential ballot, she responded to the question of what she would do if elected president. "Oh, quite a lot. For example, first, securing adequate supplies of basic needs for the upcoming Christmas, Muslim fasting month of Ramadhan and Idul Fitri celebrations," she said.

Obviously, the first tasks of the new Cabinet are to prepare the state budget, have the complete audit report on transactions in the Bank Bali scandal published, reopen negotiations with the International Monetary Fund to release about US$4.7 billion in loans for the budget currently withheld by major creditors because of the scandal and start negotiations with creditors for debt rescheduling.

Accelerating bank restructuring, which is already a few months behind schedule, is also most imperative. Without a sound banking sector, the economy will remain debilitated by the lack of lifeblood -- credit financing -- despite the steady decline in interest rates.

Similarly crucial are concerted efforts to bolster the working spirit at the Indonesian Bank Restructuring Agency (IBRA) and at the office of the ministry of the empowerment of state enterprises, which were demoralized by the Bank Bali scandal. Both institutions are tasked to raise over Rp 31 trillion for the current state budget.

Restoring capital inflow will go a long way in speeding up the economic recovery but foreign direct investors will likely follow the step of Chinese-Indonesian businesspeople. President Abdurrahman, highly respected for his concern and steadfast defense of Chinese-Indonesians and other minority groups, should act quickly to convince them to repatriate their capital, officially estimated at $30 billion, which they transferred overseas immediately after the May 1998 riots and the fall of Soeharto.