Successful election no guarantee of recovery
JAKARTA (JP): A just and fair general election scheduled for June 7 this year is no guarantee for the recovery of the country's economy, economists say.
Wijaya Adi, an economist at the Center for Social and Cultural Studies Club of the Indonesian Institute of Science (LIPI) and Sjahrir, of the Institute for Economic and Financial Research, said on Tuesday that escalating social unrest in several parts of the country -- believed to be orchestrated by political elites in Jakarta -- was hampering efforts to deliver the country from its economic paralysis.
"Even if we hold a very fair general election in June, it is no guarantee for the recovery of the country's economy," Wijaya said in a one-day seminar organized by LIPI.
He said that the frequency of social conflict in the archipelago, in the run up to the general election, was harming Indonesia's distribution and production systems.
"Damages sustained in the distribution system contribute to a disrupted flow of goods forcing price hikes in most commodities, including the basic staples. (Such activities were simultaneously occurring) at a time when people's purchasing power was declining due to the impact of economic depression," Wijaya added.
"In such a scenario, we do not see any sign of light at the end of the tunnel," he said.
The country is slated to hold a general election on June 7. It is billed to be the first democratic and fair poll following the fall of former authoritarian president Soeharto last May. A presidential and vice presidential election is due in the four months following the election.
Political analysts, however, have voiced fears that the upcoming poll will be prone to rigging despite elaborate safeguards. They hold suspicions that the ruling Golkar party will do almost anything to win the election.
Sjahrir said that the battered financial and economic climate -- which hit Indonesia in the middle of 1997 -- would not be resolved unless political reforms were put in place.
"If our economic turmoil does not worsen, that's already good," Sjahrir said, pointing out that the government should introduce stronger measures to regain public confidence.
He said it was difficult to woo back foreign investors to the country when most Indonesians themselves remained unsure about their safety and social and political prospects.
"How can you expect foreign investors to return when local people are not fully protected from social and security disturbances," Sjahrir added.
Wijaya said that an ongoing political and social crisis would contract the economy, keep inflation at double digit figures, increase unemployment and contribute to a plunging rupiah .
The worst scenario, according to his projection, would be an 8 percent economic contraction this year, with unemployment rising to 20 million and inflation exceeding 20 percent.
"With such a pessimistic view, the rupiah may decline as low as 9,500 against the dollar," he said.
The government has projected in its 1999/2000 budget, commencing in April, that the economy would stall at zero growth, inflation would reach 17 percent and the rupiah-dollar exchange rate would average Rp 7,500.
These assumptions are much more encouraging than the current fiscal year projections which predict economic contraction of minus 12 percent, inflation of 66 percent and a Rp 10,600 exchange rate. (aly)