RI elections may be positive for reforms: S&P
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.