Political stability crucial for economic recovery

Political stability crucial for economic recovery

JAKARTA (JP): Domestic and foreign analysts speaking at a
business conference here on Thursday have stressed the crucial
role of political stability and a legitimate government to
bolster Indonesia's economic recovery.

Speakers at the first day sessions of the two-day Indonesia
Forum conference at the Jakarta Hilton Convention Center were
unanimous in their view that shortfalls in the country's
political system had hindered economic recovery.

Former Australian prime minister Paul Keating said there had
not been "commensurate growth in the political institutions in
Indonesia", despite growth in the number of middle class
citizens, improvements to education and economic growth during
former president Soeharto's 32-year rule.

"There have been over 30 years of economic growth, there's
enormous economic inheritance here, but there has to be a catch-
up in the political institutions," Keating told around 350
domestic and foreign participants at the forum.

He said the country's leader should have legitimacy from his
or her own people in order to lead the nation towards recovery.

"Stronger and better things cannot be done with a government
whose authority is in question," he added.

Economist Sjahrir noted that the current government lacked
legitimacy because many of its key members had in some way
contributed to the current crisis.

Sjahrir said the country had accumulated numerous
macroeconomic distortions during Soeharto's rule which were now
proving to be extremely burdensome.

"The government has been very quick to boast that inflation
slowed down in October, that the rupiah is now comparatively
stable, and that now we have a better banking sector. But we need
proof of all these claims," he said.

He argued that the unclear and inconsistent economic policy of
the present government and the tension arising from political
conflict has left most people bewildered about what was actually
happening in the country.

Dennis de Tray, the World Bank's country manager in Indonesia,
observed that the monetary crisis had hit the emerging middle
class hardest of all, with average household expenditure in urban
areas declining by more than 30 percent.

The monetary crisis "is mainly an urban and Java phenomenon,"
de Tray said.

This could lead to some tough political problems arising,
especially around the time of the general election scheduled for
next May, he added.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita briefed the meeting on what he saw as
strong signs of an initial start on the road towards economic
recovery.

Ginandjar said that machinery imports were only slightly below
the buoyant levels seen from 1992 to 1994, while exports of
manufactured goods rose by 14 percent between January and July
and the consumer price index, the main measure of inflation, fell
slightly in October for the first time since 1997.

"The restructuring efforts we have put in place are beginning
to rekindle economic growth but we need to do more to ensure that
growth this time is sustainable," Ginandjar told participants at
the conference.

"But we still have a long a way to go," he added.

Many domestic and foreign economists have forecast a
contraction of at least 15 percent in the country's economy this
year, with minimal growth expected to begin in the second half of
next year.

The forum, held in the aftermath of massive anti-government
protests across the country, has drawn only half of the 600
participants originally expected to attend. Each participant was
charged a registration fee of US$1,000.

Six University of Indonesia students joined the forum's
lunchtime session and distributed leaflets calling for a "new
Indonesia".

Security concerns forced President B.J. Habibie to inaugurate
the conference at the State Palace instead of the Jakarta Hilton
Convention Center, which is situated near to the People's
Consultative Assembly building. (das)