RI political uncertainty could affect region

RI political uncertainty could affect region

MELBOURNE (Reuters): A leading investment bank said on Tuesday
that political uncertainty in Indonesia could trigger fresh
financial turmoil in Asia unless it was resolved soon.

U.S.-based bank Salomon Smith Barney's Asian chief, Trevor
Rowe, said investors wanted President Soeharto to unveil a clear
succession plan before his current term expired next month.

"The big concern right now is Indonesia -- that is the focus
in terms of the region's stability," Rowe told a Melbourne
briefing on Asia's economic crisis.

"The market is waiting to see what initiative President
Soeharto takes in terms of nominating a successor," he added.

Soeharto, 76, has ruled Indonesia with a firm grip since the
mid-1960s, but has faced unprecedented calls to step down in
recent weeks as the nation's economic crisis deepened.

"If there is further instability in Indonesia this will
obviously slow the recovery in the rest of Asia, particularly in
the South Asian region," Rowe said.

"We could see continued currency instability or the socio-
economic problems we are seeing as a result of that."

Soeharto has spoken of fixing the rupiah's exchange rate
against the U.S. dollar for priority imports. He is expected soon
to announce his steps to manage the rupiah's exchange rate.

The rupiah has nose-dived against the dollar since Indonesia
found itself in the eye of Asia's financial storm late last year.

But Rowe said he doubted a fixed exchange rate alone would
achieve long-term stability for the rupiah.

"I think there's less chance of getting long-term stability
until the political issue and the (economic) reform programs are
implemented," he said.

"Until they are done you won't get the desired effects of
maximizing the benefits of the reform program."

The International Monetary Fund (IMF) has offered $43 billion
in aid to Indonesia on condition it reforms its economy.