RI's economy on the mend despite ongoing instability

RI's economy on the mend despite ongoing instability

SINGAPORE (AP): Despite continuing political instability and
delays in implementing market reforms, the economy of Indonesia -
the largest nation in Southeast Asia - is on the mend after a
three-year recession, the country's economics minister said.

"By next year, I believe the party will be in full swing,"
Rizal Ramli said in a speech late Thursday. He predicted foreign
investors, who have been keeping Indonesia at arm's length
because of political instability, will start returning in 2001.

Addressing a business forum in Singapore held concurrently
with this week's summit of the Association of Southeast Asian
Nations, Ramli predicted that political instability will subside
in coming months.

Ramli said that Vice President Megawati Sukarnoputri had told
him she would continue to support President Abdurrahman Wahid,
who has been under attack from a coalition of Muslim parties and
other hard-liners in parliament.

Without the support of Megawati's party - the country's
largest - no effort to impeach the president can succeed.

Continuing separatist conflicts in the westernmost province of
Aceh and Irian Jaya, on Indonesia's eastern end - as well as a
persistent war between Christians and Muslims in the Maluku
archipelago - also have scared away foreign investors.

Ramli said Indonesia's economic growth would be a respectable
4.5 percent this year and possibly rise by another percentage
point in 2001.

The sprawling nation is experiencing its first real growth
since 1997. In 1998, when the Asian crisis exploded with full
force, gross national product plunged by 14 percent. There was no
growth last year.

Economists say the current recovery, which reached 5.12
percent in the third quarter, is rooted in increased domestic
consumer spending, non-oil exports and in energy exports whose
value has rocketed because of rising world oil prices.

Ramli, who became chief economics minister when Wahid
appointed a new, streamlined 26-member cabinet in August, said
that another indicator of economic strength was the steady
expansion in industrial plants' capacity utilization.

Three months ago, average utilization was less than 60
percent, he said. But now it had reached 70 percent and was
expected to continue to grow.

Still, the economy is beset by serious problems, including
rising interest rates - now amounting to 14 percent. Bank loans
have virtually dried up as a result.

Windfall profits generated by oil exports have enabled the
government to decrease its budget deficit to only 3.7 percent of
GDP this year. The administration plans to push it further down
in 2001 through accelerated privatization of government-owned
assets, including some of the country's largest banks, Ramli
said.

Also, Jakarta will issue bonds backed by revenue from gas
sales to Singapore, whose credit rating is much higher than
Indonesia's, making the bonds more attractive to investors.