Jakarta – The slide in Indonesia's currrency, the rupiah, has been caused by political and not economic problems, a senior presidential advisor on the economy said here Wednesday.
"It was all OK during the last quarter of last year and the first quarter of this year, then in May it was suddenly not OK," said Emil Salim, the head of the National Economic Council (DEN) which advises the president.
"The issues are politics and security, not economics ... especially after the two ministers were taken out," Salim told a foreign correspondents' club lunch here, commenting on the slide of the rupiah from the 7,000 to the 8,000 range against the dollar.
He was referring to the largely unpopular decision by President Abdurrahman Wahid last month to replace two cabinet ministers, Investment and State Enterprises Minister Laksamana Sukardi, and Industry and Trade Minister Yusuf Kalla.
Salim, who served from 1970 to 1993 in various cabinet posts under former president Suharto and who was on the barricades with students who campaigned to unseat Suharto in 1998, said he had advised Wahid that his economic policies were not to blame. "You don't take an aspirin for a stomach ache, you take it for a headache," Salim said.
He said the new letter of intent signed with the International Monetary Fund (IMF) Wednesday made the country's economic direction clear and involved not only economic goals, but transparency of the courts and the rule of law.
As soon as the new letter is approved by the IMF, discussions will begin on the next letter, he added. "If the government can stick to that and say bluntly 'this is what we want to do,' then [investor and public] confidence will come back," he said.
"What is the problem – we have a coalition cabinet, which is not supported by the parties involved," Salim said of the current political shakiness in Jakarta. "If this continues, I can see a reason for Gus Dur [Wahid's popular appelation] to review the cabinet [composition] after August," when the people's Consulative Assembly (MPR) meets to review the government's performance.
Saying he thought the "honeymoon is slipping away now" for the country's first popularly elected president in decades, Salim attributed some of the new harsh criticism of the Wahid government to ingrained habit.
"In the last years of Suharto there was a tendency for all of us to attack the establishment, everything was under attack, the same with [Suharto's successor B.J.] Habibie and now Gus Dur."
Saying the government was "in a learning curve" of making poltical and economic decisions in a democratic environment after decades of authoritarian rule under Suharto, Salim conceded that Wahid's off the cuff comments sometimes added to confusion in the markets.
But he called Wahid a "born politician," pointing to his handling of the country's powerful military and his election in October last year by a coalition of parties – many of whom he said were now pulling against the president.
Answering questions on moves by some MP's to unseat Wahid when the MPR meets to assess his performance in August, Salim said he thought any such moves would be unsuccessful.
"The change from Suharto to Habibie came not through a coup, that was the important thing," he said. "So if [there is change in government] it must be through the MPR. If there are no big constitutional mistakes – I don't think it (any such move) will be successful. There is a lot of noise of course, but I think the coalition is still strong."
Asked about accusations of nepotism levelled at the controversial appointment of Wahid's younger brother, Hashim Wahid, a non- economist, to the Indonesian Bank Restructuring Agency (IBRA), Salim said he felt he was there as a watchdog.
"IBRA is a very rich and powerful entity, with 40 percent of the whole state's assets. I think he wants to be darn sure he can trust them fully. My feeling is he is there as an informer," Salim said.
"Those are huge assets. It is in his [Wahid's] interests" to make sure there are no irregularities, he said. "Otherwise it could shake his position," he said, adding that there were plenty of professionals already in the IBRA. An ombudsman existed for anyone to run checks on IBRA if they had qualms, he added.