Politics must stay out of new economic team: Experts

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)