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