RI presidential election 'influences' crisis

RI presidential election 'influences' crisis

SINGAPORE (Reuters): Singapore's former prime minister Lee
Kuan Yew has said the worst of Asia's financial troubles will not
be over until after Indonesian presidential elections next month,
the local Sunday Times newspaper reported.

"If there are no upsets in the election, the situation will
stabilize and improve. If there are, the currencies and stock
markets in the region will be affected by a bout of panic and
nervousness," it quoted Lee as saying in a speech at a dinner on
Saturday evening.

Lee, who led Singapore for 31 years until 1990, said the
Indonesian rupiah currency would weaken again if the market was
uncomfortable with the country's next vice-president.

Indonesia's aging President Soeharto has said he would accept
the nomination of the ruling Golkar party to run for a seventh
five-year term in office.

The country's 1,000-member People's Consultative Congress
(MPR) meets on March 1 and is expected to elect Soeharto for a
seventh five-year term on March 9.

But there is intense speculation over who will be Soeharto's
running mate and potential successor. The 76-year-old President
has given no formal indication of who he might favor.

Rumors that research and technology minister B.J. Habibie
might be a preferred candidate for the post caused a sharp fall
in the value of the rupiah last month. Habibie has been
associated with a number of big spending projects.

Lee was quoted as saying market unhappiness with the
Indonesian vice-president would lead to higher inflation, more
companies going bankrupt and greater unemployment.

"The resulting social problems will be widespread," he said.

"It is vital to Indonesia that the rupiah is stabilized and
the stock market begins to recover. Otherwise, the fallout would
be bad for Indonesia and may again spread panic over the region,"
he said.

Lee blamed the Southeast Asian financial crisis on politics.

Investor confidence evaporated when ballooning current account
deficits in countries like Thailand, Indonesia and South Korea,
which had borrowed heavily in U.S. dollars, became apparent.

He said their overspending was made possible because of weak
banking systems, and was exacerbated by corruption and cronyism.

But the root of the problem was political because governments
were preoccupied by political difficulties and had not heeded
warning signals from the market.

"The Thais had six governments in five years and none had the
time to attend to the gaping current account deficits. The
Malaysian Prime Minister (Mahathir Mohamad) condemned foreign
speculators.

"And President Soeharto thought that he could ride out this
crisis as he had ridden so many others in the past 30 years."

But Lee had praise for current Thai Prime Minister Chuan
Leekpai and South Korean President-elect Kim Dae-Jung who he said
had been "saying and doing all the right things".

"It is a crisis of confidence, and confidence has not yet been
restored," he said. "Where the market is not convinced that the
leader is doing what is necessary, they have withheld their vote
of confidence and the currency is vulnerable."

Arms buying -- Page 4

Protectionism -- Page 10

Asian stocks -- Page 11