Successful election no guarantee of recovery

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)