RI elections may be positive for reforms: S&P
The Jakarta Post, Jakarta
Standard & Poor's Ratings Services said on Wednesday that Indonesia's presidential elections, where preliminary results point to a victory for Susilo Bambang Yudhoyono, are not expected to herald major policy shifts, but could be positive for reforms over the medium term.
A Susilo administration is expected to focus on further entrenching macroeconomic and political stability, but will face considerable challenges in moving to the next step -- implementing microeconomic reforms essential to elevate the country onto higher growth, the rating firm said in a statement.
"The key to success would be the new president's ability to build consensus and rally support in a parliament that will be dominated by the larger, established parties," said Standard & Poor's credit analyst Agost Benard.
Evidence of a conducive working relationship between president and legislature through the timely passage of reform bills and continued adherence to fiscal consolidation would be positive for Indonesia's sovereign credit rating, it said.
Although Susilo's likely large margin of victory will equip him with a solid mandate, it will also set him up against high expectations to deliver speedy improvements, primarily in economic fortunes.
His brief is to steer the country through its next phase of development following the accomplishment of relative political and macroeconomic stability, which entails initiating and seeing through an extensive range of microeconomic and political reforms.
In particular, measures to reduce pervasive corruption, increase the competence and integrity of the judiciary, create a predictable and fair commercial legal environment, create internationally competitive labor markets, and cohesive industry and trade policy, are urgently needed to reverse the country's declining competitiveness.
Terrorism will continue to remain a challenge for his presidency, and expectations from within and abroad are high that he will deal with it in a more comprehensive and capable manner than his predecessor.
During his campaign, Susilo indicated keen awareness of the major reform needs. These reforms, however, are qualitatively different tasks and are more difficult to accomplish than the initial stabilization phase, from both a practical and social perspective.
Susilo also has to contend with a fragmented parliament, where his Democratic Party captured only 10.4 percent of the seats. Thus, securing the support of the two major parties, Golkar and PDI-P (together holding 43 percent of seats), and of various smaller ones may be difficult, or come at a cost of diluting legislation, compromising its effectiveness.
"Therefore, while Indonesia's impending change of guard could potentially herald moves in the right direction, the difficulties likely to be encountered cannot be underestimated," the rating firm said.