‘High-risk’ image won’t help Indonesia, says Mega

With not much good news to report, she says economic recovery and regaining investor confidence are top priorities

Indonesia needs to shed its “high-risk” image for economic recovery to take root, President Megawati Sukarnoputri said yesterday as she vowed to crack down on attempts to undermine national stability.

Addressing the annual session of the People’s Consultative Assembly (MPR), the country’s highest legislative body, she painted a gloomy picture of a cash-strapped Indonesian economy struggling against a backdrop of domestic security concerns.

Restoring the economy was the top priority for the 54-year-old leader. She said: “Economic recovery is the most critical …it will carry a positive impact on many other problems in the country … But I have to admit that there has not been much good news that I can report … ”

Bad news there were aplenty, which in turn caused a slide in the rupiah to 10,600 against the US dollar.

While seeking to reassure Indonesia’s donors that her government would honour all its foreign debt obligations, Ms Megawati made clear that the task would be difficult.

She pointed out that Jakarta’s ability to repay its US$140-billion (S$256-billion) debt burden was being stretched to “dangerous levels” while the government’s already thin spending might have to be cut even more.

She said privatisation programmes also had to proceed “very carefully”, which signalled more delays in the government’s stalled campaign to sell off state assets to finance the budget.

The government had hoped initially to raise 6.5 trillion rupiah (S$1.13 billion) from privatisation and 27 trillion rupiah from asset sales, but the targets have been cast in doubt by external events.

Ms Megawati noted that the Sept 11 terrorist attacks in the United States had created the threat of a world economic recession that could do further damage to Indonesia’s recovery efforts.

But a more pressing concern for her was political and social stability at home – the only way to entice foreign investors back into the country.

She noted that problems arising from anti-US protest over the attacks on Afghanistan had harmed the industrial and tourist sectors.

For the “sake of larger national interests”, she warned that the government would not tolerate separatism and would take firm action against riots and mass unrest.

Drawing in more foreign investors also required consistent economic policies, she said, reflecting concerns that many businessmen faced conflicting regulations and levies in the provinces since Indonesia’s regional autonomy law came into effect last year.

Economics figured significantly in the President’s report to the 700-member national assembly, but the next nine days of the session is likely to be dominated by political issues and bickering among different factions.

Apart from the proposal for direct presidential elections, the MPR is expected to debate other amendments to the 1945 Constitution.

Several Muslim parties are also pushing for the Islamic syariah law, opposed by the government and Indonesia’s two largest Muslim organisations.