Political turmoil 'could spell economic chaos'
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)