Politics must stay out of new economic team: Experts

JAKARTA (JP): President Megawati Soekarnoputri should avoid political compromise in the formation of her next Cabinet economic team, as it would slow down efforts to bring the country's economic recovery back on track, experts said on Tuesday.

National Economic Recovery Committee (KPEN) executive, Sofyan Wanandi said that months of political infighting had hampered the economic recovery for too long.

"We cannot allow the next economic team to bow to the interests of political parties," Sofyan told The Jakarta Post.

Sofyan said that although Megawati had won the presidency through the help of other political parties, it should not lessen the credibility of her next economic team.

"She can accommodate the interest of political parties in other ministerial positions," he said.

He added the government had little time left to address the country's economic woes.

The country's political impasse has dragged on since early this year, as tension between former President Abdurrahman Wahid and legislators grew.

It bred speculation against the rupiah, which burdened the state budget as the local unit got weaker.

To ease pressure on the budget, the government hiked fuel prices and tax revenues, both of which measures had increased inflation.

Also, political instability prevented the return of foreign investment that would have helped the rupiah and the economy.

Sofyan said the new economic team should comprise professionals who had proven credibility with foreign investors.

"They should be well-versed in working with international financial institutions," he said.

Sofyan urged the new team to make clear its priorities, and put them into action in less than 100 days.

"The new team should also act in unison with the central bank on its monetary and fiscal policies," he said.

Regional research director at SG Securities Lin Che Wei said the past practice of allocating economic ministries to different political parties must end.

But he said Megawati could ill afford to ignore other parties, as that would cause political instability to continue.

He said unlike Abdurrahman's first Cabinet, Megawati's would face less pressure for a political compromise since her party, the Indonesian Democratic Party of Struggle, is the largest.

"However, the problems Megawati inherits from the past government, are far larger than the ones Gus Dur did," he said, referring to the former president by his popular name.

Che Wei said the greatest problem that lay ahead was to curb the growing state budget deficit.

Much of the budget spending depended on the rupiah rate, which had been set at 9,800 against the U.S dollar.

The longer the rupiah remained below the assumed level, the greater the hole in the budget, Che Wei explained.

Based on his calculations, the rupiah had to hover at around 8,400 for the remainder of the year for the average to reduce to the assumed level.

As the chances were slim that the rupiah could reach and sustain that level, the probability was high that the government would need to resort to more spending cuts, he said.

Senior economist at Gadjah Mada University, Sri Adiningsih said Megawati's victory gave hope for an end to political instability.

But she added that Megawati faced a more difficult economic situation, both at home and abroad.

With the global economy close to descending into recession, Indonesia could hardly expect export revenues to continue as a driving force behind the economy.

"Therefore, Megawati should seize the momentum to form a solid and credible economic team," she said.

According to her, to maintain the market's confidence in the new government, Megawati would have to make clear her economic policies.

Elsewhere, the Indonesian Chamber of Commerce (Kadin) warned that without a clear program, the market euphoria would be short- lived.

Kadin chairman Aburizal Bakrie said in a statement that he hoped the business climate would improve with the formation of a new government.

"Kadin is urging all parties to hold a political moratorium and refocus attention toward economic recovery," he said. (bkm/rei)