Ratings agencies says RI still in woods post-Wahid

Ratings agencies says RI still in woods post-Wahid

NEW YORK (Dow Jones): The peaceful ascension of Megawati
Soekarnoputri to the Indonesian presidency alone isn't enough to
help the country's near-term outlook, according to two major
ratings agencies.

Indonesian lawmakers voted overwhelmingly Monday to replace
President Abdurrahman Wahid with political rival Megawati, who
had served as vice president for nearly two years. When the
disgraced Wahid refused to quit his job and leave the
presidential palace, he got little support from the military and
the courts. The national assembly had been attempting to impeach
him for months for alleged corruption and incompetence.

"The fact that President Wahid has been replaced without large
scale social unrest is a positive," said Ashok Bhatia, the
primary analyst for Indonesia at Standard & Poor's Corp.

But Bhatia added that the recent developments hadn't come as a
surprise, and that lingering uncertainty could continue to
constrain Indonesia's long-term foreign currency ratings of
triple-C plus with a negative outlook, a mere two notches above a
default rating.

"We feel that even in a best-case scenario Indonesia is
unlikely to be able to manage without further Paris Club
reschedulings," Bhatia said in reference to the umbrella group of
sovereign creditors.

Wahid has left a daunting mess for Megawati to clean up. Last
spring the International Monetary Fund canceled around $400
million of funding to the country, saying Indonesia failed to
honor commitments made earlier in return for the money. The IMF
has made a string of demands, including a privatization program
and reassurance that the central bank will remain autonomous.

"Megawati needs to come out with a strong statement affirming
the independence of the central bank, without delay," Bhatia
said.

A couple of weeks ago an IMF mission indicated that it had
finally reached agreement with the Indonesian government, which
has said IMF disbursements could finally restart in August.

"I think (the IMF) will wait and see if the new government can
perform" before taking action, said Steven Hess, lead analyst for
Indonesia at Moody's Investors Service. "They've already had the
experience of being disappointed."

Megawati, the daughter of founding president Sukarno, is
Indonesia's fourth president in little more than three years.

Indonesia's ratings, which are currently two notches above
Moody's lowest rung at B3 with a stable outlook, aren't likely to
change in the upward direction any time soon, Hess said.

"If the new government can regain the confidence of the
populace at large, this could be a turning point," he said. "But
the problems they have to cope with are so large, it's hard to
tell right now whether they'll be effective."

Megawati has offered few details about how she plans to turn
around Indonesia's struggling economy.