Ardian Wibisono – Investors and business leaders on Friday welcomed President Susilo Bambang Yudhoyono's steadfast defense of Vice President Boediono and Finance Minister Sri Mulyani Indrawati over the Bank Century bailout, saying it should help improve confidence in the government.

The president's statement appeared to reassure investors that he would not bow to political pressure to ditch Sri Mulyani and Boediono, who are both seen as vital to the country's reform drive.

Several indicators reflected the positive reaction to Yudhoyono's speech. The benchmark Jakarta Composite Index rose 0.5 percent to 2,578.77 on Friday, and the country's credit-default swaps, a kind of insurance on bond defaults, fell by 4.4 percent on Thursday night.

"The rising JCI and improvement in the credit-default swaps is due to easing global economic worries and investor confidence in taking more risk. However, the president's speech also contributed and created a positive reaction," said Fauzi Ichsan, an economist with Standard Chartered Bank. "The firm statement should also signal to the real sector to start expanding their businesses and end their wait-and-see approach."

In a speech on Thursday night, Yudhoyono said the bailout not only was meant to save the small, troubled bank but the country's entire banking system amid an escalating global financial crisis.

He added that the move, taken in late 2008 by Sri Mulyani and Boediono, then central bank governor, was legitimate.

Djimanto, secretary general of the Indonesian Employers Association (Apindo), agreed that Yudhoyono's statement eased worries among some business leaders over the country's political outlook. "With less worries on the political front, we can be more focused on expanding our businesses," he said.

However, the relationship between the government and the House of Representatives might have been damaged by the inquiry, which also saw the president's governing coalition come under intense strain.

"A looser relationship between the House and the government would make it harder for the government to get approval from the House for things like revising this year's state budget," Djimanto said. "It would not impact overall economic growth but it could delay government spending."

Confidence in the government has fallen significantly since the House inquiry into the Bank Century bailout began.

A survey by the state's Danareksa Research Institute showed that the Consumer Confidence in the Government Index had fallen from 118.9 points in August to 99.6 in January. A reading above 100 shows optimism. Anything below that level reflects pessimism.