Polls won't harm RI economy: Banker

Polls won't harm RI economy: Banker

Dow Jones, Bali, Indonesia

Indonesia's elections next year aren't likely to affect the
direction of the government's economic and fiscal policies and so
the economy should continue to grow, the chief economist for Asia
at Deutsche Bank AG said Thursday.

"I think (Indonesia's) economy will function just fine,"
Michael Spencer told Dow Jones Newswires in an interview. "The
elections will be colorful and eventful but policy continuity is
certain," he said. "The policy process and the outcome of policy
decision is not politicized here (in Indonesia) as it has been
perceived a number of years ago."

Spencer said he expects Indonesia's economy to expand 4
percent in 2004, up from 3.5 percent growth he forecasts for this
year. Also next year, he said, Bank Indonesia's one-month
benchmark interest rate should fall slightly from 8.43 percent
now and the rupiah should remain stable against the dollar.

The central bank and Finance Ministry have prudently managed
monetary and fiscal policy, respectively, he said.

Indonesia will hold parliamentary elections in April and a
presidential vote in July. Some analyst have expressed concern
that the economy, as well as government policy, could be
disrupted by heightened political conflict, though many expect
President Megawati Soekarnoputri to be re-elected.

Whether Megawati is re-elected or not, said Spencer,
"Indonesian politics and policy continuity will be very strong."

He said the new parliament will be preoccupied with issues of
nation building rather than being closely involved in economic
matters.

But Spencer said the government will need to improve the
investment climate. If not, he said, investment, a key ingredient
for growth, will continue to be low.

Corruption in Indonesia's legal system and a lack of certainty
surrounding business contracts have made foreign investors
reluctant to put their money into the local economy, despite an
improvement in political stability since Megawati took power in
July 2000.

Spencer said that once the investment climate improves
investors would do well to look at agricultural and resource-
based industries, areas that remain largely underdeveloped