Abdul Khalik, Jakarta – With the global financial crisis currently battering local markets and expected to hit middle and low-income families within the next three months, domestic politics could turn ugly in the lead up to the April 2009 general elections.
The economic slump could be prolonged if the government, political parties and lawmakers at the House of Representatives become locked in a battle for popularity, rather than joining together to fight the crisis, experts warn.
"The crisis will be felt by middle-income families at least, as high costs start to bite companies and commodity prices go up sometime in January," University of Indonesia political expert Hariyadi Wirawan said.
Massive layoffs could be unavoidable as companies try to cut costs, which could lead to a rush on banks because the low public trust in authorities means the domestic economy remains vulnerable to rumors, he said.
This would be similar to the situation during the Asian financial crisis, which began in late 1997.
"It's unfortunate that it will happen just a few months before the legislative and presidential elections," Hariyadi said.
"We are worried that political parties and politicians will take advantage of the situation to attack the government without offering solutions, thus worsening the crisis."
He urged all national political elements, including opposition parties, to unite to help avoid a financial crunch.
Political economy expert Makmur Keliat said President Susilo Bambang Yudhoyono should explain to the public the implications of the suspension of the Indonesia Stock Exchange (IDX) and the role of the Bakrie Group in the suspension decision.
"Many are wondering what is really happening. This is the kind of incident that could wipe out public trust in authorities and business. So the public needs to get a logical explanation," he said.
In addition to the regional trend of falling share prices, many have suggested another factor behind the Jakarta market's free fall from Monday to Wednesday last week was that speculation over PT Bakrie & Brothers and its units dragged down the group's shares.
The decline in stock prices of Bakrie and its units, in particular PT Bumi Resources, was the main driver behind the IDX's 10.03 percent fall last Monday, with transactions involving the group making up around a third of the total transactions.
The speculations center on concerns Bakrie will not be able to pay its short-term debts, which amount to US$1.43 billion. The loans are backed by the shares of affiliated companies, including Bumi, PT Energi Mega Persada and PT Bakrie Sumatra Plantations.
Makmur said the suspension send the public a strong signal that the financial crisis was politicized, given that the Bakrie Group is linked to Aburizal Bakrie, Yudhoyono's coordinating minister for the people's welfare.
"Politics begins to play a part here and it creates uncertainty," Makmur said. "The government must be transparent about what companies here have been hit by the bankruptcy of US financial firms. We need to know if the tentacles of the financial trouble are reaching to Indonesian firms to protect the public."
Lawmaker Ganjar Parnowo of the Indonesian Democratic Party of Struggle (PDI-P) promised his party would not stand in the way of any government efforts to soften the crisis as long as the policies made sense.