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.