Uncertainty spooks market

While everybody agrees that it is President Abdurrahman Wahid's constitutional prerogative to appoint and replace his Cabinet members and that his economic team did require a realignment, his sacking of Industry Minister Jusuf Kalla and State Minister of Investment and State Enterprises Laksamana Sukardi on Monday spooked the market. The Jakarta Stock Exchange tumbled 2 percent on Tuesday but was up 1 percent on Wednesday. The rupiah weakened steadily and breached the Rp 8,000 mark against the dollar as investors became jittery.

The reason behind the negative market reaction is quite obvious. As the reshuffling appeared to be based only on the President's discretionary power and not on clear-cut performance parameters, the move sparked a new element of uncertainty, the number one enemy of business. The absence of clearly defined- yardsticks further fueled rumors that the positions of other economics ministers, notably Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie and Minister of Finance Bambang Soedibyo, were also on the line.

The fact that even leaders of the Golkar Party and Vice President Megawati Sukarnoputri's Indonesian Democratic Party of Struggle (PDI-Perjuangan) were in the dark about the real reason behind the firing made businesspeople jittery. The threats by these two major parties to pull out their other ministers from the Cabinet further shook up the market, fearing that the coalition Cabinet was on the verge of unwinding.

In fact, the firing of the two ministers, notably Laksamana, did not fit in with the basic principles of good governance that Abdurrahman likes to proclaim as one of the top priorities of his administration. The latest reshuffling was strikingly different from the previous sacking of two ministers (Hamzah Haz and Wiranto) as the reasons behind the earlier move were clearly understood and accepted by the public.

Simply stating that the two ministers failed to build up good rapport and strong teamwork with other economics ministers not only unnecessarily raised questions but was also counterproductive to the President's original objective of increasing the credibility of his economic team.

True, Cabinet members are top assistants to the President and Abdurrahman has every right to get ministers whom he fully trusts and who fully share his vision. This does not mean, however, that ministerial appointments or dismissals -- notably those related to economic portfolios where technical competence is one of the basic prerequisites -- can be made arbitrarily without accountability acceptable to the market.

Whatever the vision Abdurrahman asks his ministers to understand and pursue, the stark reality as the market perceives it, is that the main task of his Cabinet is managing the economic crisis. And the procedures and the targets of the economic crisis management are clearly and completely stipulated in the government's Jan. 20 Letter of Intent regarding reform programs to the International Monetary Fund.

True, assessed against the parameters set forth in the document, the performance of the economic team of the Cabinet is rather poor as the economics ministers have so far failed to meet many of the reform deadlines, prompting the IMF to postpone the second disbursement of its loans for almost two months until late May or early June. The problem, though, is that if the reform agenda is used as the benchmark for the performance of each member of the economic team, one could not find enough evidence to prove that Kalla and Laksamana were the poorest performers or the least cooperative members of the team.

As the President might again have to tinker with his coalition Cabinet members, one great lesson Abdurrahman should learn from the controversial reshuffling is that the reasons and rationale for such a move should be clearly understood in order to gain political support and market acceptance.

But most importantly, the President would be well advised to first thoroughly review the political feasibility of the reform agenda and the government's capability to implement the reform measures as these two factors, and not the personnel of his economic team, might be the root causes of the woes besetting his economic-crisis management team.