Political turmoil 'could spell economic chaos'
JAKARTA (JP): Continuing political turmoil will only serve to devastate the country's beleaguered economy and postpone the recovery processes indefinitely, economists said yesterday.
Umar Juoro from the Center for Information and Development Studies, a think tank affiliated with the Association of Indonesian Moslem Intellectuals, said President Soeharto's offer to step down after fresh parliamentary polls prompted business players to take a "wait and see" strategy.
"President Soeharto's statement has just caused more uncertainty for our country because his offer was flatly rejected by students and some elements in the society.
"I have checked it with some investors, and they said the current situation was so uncertain and therefore they would not enter Indonesia until everything had settled down," Umar said.
The situation automatically halted economic recovery programs, backed by multibillion dollar financing arranged by the International Monetary Fund, he said.
Umar suggested that Soeharto should step down soon to allow political reform to proceed quickly, permitting the economic recovery processes to resume again.
Mari E. Pangestu, executive director of the Center for Strategic and International Studies, added that economic recovery would take longer than previously predicted.
Economic recovery required restoration of market confidence and inflow of fresh capital, both of which were not possible in the current situation.
She expected the political turmoil would ultimately result in the emergence of good governance, and also good corporate governance.
Only in such a situation, foreign capital would reenter Indonesia, and economic recovery could start.
Mari said persistence of the uncertainty would only increase the burden of those most affected by the crisis.
Prices of goods would continue to rise as production and distribution were disrupted.
The departure of expatriates would paralyze the operation of multinational companies here, and the flight of the ethnic Chinese would hamper the distribution of goods because they control a large part of the retail sector.
Exports would also totally be disrupted due to unaccepted letters of credits, unavailability of financing sources and containers.
Besides, foreign shipping liners were already avoiding entering Indonesia, and insurance firms were raising shipping insurance premiums to adjust with the increasing political and social risks in Indonesia.
Didik J. Rachbini from the Institute for Development of Economics and Finance said the most daunting problem for the government for the time being would be to ensure the availability of basic staples, especially rice -- the main diet for most Indonesians.
The availability of basic staples like rice at affordable prices was necessary to avoid any social chaos because some 120 million people now lived around the poverty lines.
He predicted that it would not be difficult for the government to provide enough rice to the market as the country's great harvest of rice had just started.
He also said it was important for the country to make quick political move to end the current political stalemate to make it possible for economic recovery processes. (rid)