Asia Times: Economy is the other winner in historic election



	June 26, 1999	atimes.com

Southeast Asia

Economy is the other winner in historic election
By Kafil Yamin

JAKARTA - Nearly three weeks after Indonesians heldtheir first free poll in four decades, as vote-counting proceeds, it appears that not onlythe opposition is ahead. The economy, which took abeating from political instability at home and a recession in theregion, is turning out to be a winner too, say analysts.

Key economic indicators are showing positive signs, they add,reflecting investor acceptance of partial results of the June 7parliamentary elections. The steady rise of the rupiah against the U.S. dollar, betterstock prices and easing interest rates could also signal that theeconomy has seen the worst and may be heading towards a recovery.

The rupiah, which plunged to around 17,000 to a U.S. dollarat the height of the financial crisis almost two years ago, hasbeen on a steady climb. It hit a high of 6,590 on Wednesdaycompared with range of between 7,700-8,000 to a dollar before thehistoric elections. Currency traders say fund inflows from foreign investors haveincreased after the generally peaceful and orderly elections, astrong indication of the return of investor confidence that wasshattered during last year's anarchy in the capital, Jakarta.

The currency and share markets, analysts say, were also drivenby local investor sentiment on the back of a commanding lead bythe opposition Indonesia Democratic Party-Struggle(PDI-P) led by Megawati Sukarnoputri. With over half of the votes counted, the party of Megawati,daughter of Indonesia's founding president, Sukarno, enjoys nearly37 per cent of the vote.

The ruling Golkar party of former president Suharto, which wasexpected to fare poorly, is improving its standing and is slowlyinching up in the race. The party which was unchallenged duringSuharto's 32-year reign, has moved up from a poor third to second place with more than 18per cent of the vote, latest results show. Official counting isexpected to be completed in July.

Meanwhile, many Indonesian-Chinese who went overseas ahead of thecountry's historic election are returning home after the polldefied predictions of bloodshed. ''I'm back because everything seems to have gone fine. I've beenin Singapore for nine months,'' one ethnic Chinese said on hisarrival at the airport. The ethnic Chinese, who dominate the Indonesian economy, becametargets of violent attacks by native Indonesians during bloodyriots that led to the downfall of Suharto in May 1998.

While some believe that economic recovery is only a matter oftime, others say it will take more time and far more than economicindicators to see whether any recovery is sustainable. Investors would like to see first what the new government will be like and what sort of reforms it will carry out.

Some ordinary citizens, however, seem to have formed an opinion on howthe economy will shape up and deplore what they say will be anincreased dependence on foreign capital. 'Foreigners will be in control of the economy, won't they?''asked Lina Marlina, an employee at Landmark propertymanagement in Jakarta. ''Everything is sold to foreigners. What's left are foodstalls,paddyfields, and other small-scale businesses."

''We will be economically colonized,'' said Siani Lestari, anemployee of a car showroom in Jakarta. ''We will have democracy inpolitics, but numerous restrictions on the economy."

One other factor to consider is the role of the InternationalMonetary Fund (IMF), which put together a multi-billion-dollarrescue package after the Indonesian economy suffered its worstcrisis in 1997. The IMF earlier voiced concern about the PDI-P's reported plan tointroduce Malaysian-style currency controls but the party's chiefeconomic adviser, Kwik Kian Gie, said last week he would not pushthe plan. Kwik, who is tipped to be Indonesia's next economic minister,said: ''We will comply with the IMF''.

''For years to come, Indonesia will see its economic policiesbeing directed from New York,'' said Muharramsyah, an activist ofVillage cooperatives in Bandung, West Java.

And so, even if the PDI-P wins the poll and reformists dominatethe next cabinet, ''the real president of Indonesian economy willremain Michel Camdessus with Hubert Neiss as its financeminister'', said Goei Siauw Hong, head of Nomura IndonesiaResearch. ''Forget the economic program it brought forward during the lastcampaign. What it will carry out is the IMF economic program,'' hesaid in a phone interview. Camdessus is the IMF managing director and Neiss is the Fund'sAsia representative.

Any shift in the country's broad economic policiesnotwithstanding, small businesses are confident they will continueto be an integral part of the country's economy. ''There is a common commitment to promote small business andrural-based economies,'' said Ermawati Chotim, researcher at theAKATIGA Social Study Center.

Optimism about the prospects of small businesses is based on thefact that small businesses proved their mettle after surviving thecrisis. ''While the spoiled conglomerates collapsed, the small businessessurvived and continued to absorb more than 50 percent of the workforce,'' Chotim added. AKATIGA research also showed that 38 percent of small businesseseven managed to improve their performance during the crisis. Nowthat the economy is moving towards a recovery, they should bemuch stronger, it said.

Some non-governmental organizations are pinning their hopes onentrepreneurship in rural areas. ''I think we will see a morepopulist economy in the future,'' said Setiabudi, director of thegroup Restoration of People's Economic Power. Both Chotim and Setiabudi, however, are concerned aboutcorruption. ''At the national level, the anti-corruption campaignhas seen results. But in lower levels of administration, we haveto wait for another decade to be really freed from corruption.''Chotim said.

(Inter Press Service)

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