Presenting a balance sheet of Indonesia’s difficult economic and political transition since the twin crises of 1997-98, Economics Minister Dr Dorodjatun Kuntjoror-Jakti said just a few days before the crucial presidential elections that the reforms to date were irreversible but that considerable improvements will continue to be needed to upgrade the standard of living and restore investor confidence.

While the return to a President who is a former Army general after three unsuccessful civilian predecessors is a mixed signal that provokes concern in Indonesia and some other international partners, his apparent competence and moderate image will, it is hoped, restore confidence of international investors and traders. He is also expected to place a high priority on job creation and the rural-agricultural sector that is still a high proportion of the economy and work force. With about 50% of the votes reportedly counted and showing him with a commanding lead of some 60% of the votes over incumbent President Megawati, Bambang was quoted as calling on “all political elite to continue our reform to develop the democracy that is now fostering in Indonesia.”

The outgoing Coordinating Minister for Economics noted earlier that when he was called from his post as ambassador to the US by President Megawati to assume the office some three years earlier, the country “was in a mess,” which he attributes to the ingrained “KKN” system of corruption, cronyism and nepotism. He added that it also had to face challenges from the epidemics in SARS and Bird Flu, four presidential changes, terrorist attacks and the more recent oil price surge. He also adds that “The financial crisis was immediately translated into a political crisis.” But Southeast Asia’s largest state had rebounded from a 13.3% decline in GDP in the late 1990s to register growth rates of 4% in recent years, he added.

And while he forecast that 2005 “should be much better” and predicted a “return to normalcy,” he acknowledged that Indonesia was still “in the midst of uncertainty,” and that it still “faces a question of whether it can face a crisis like 97-98.” Faster growth rates would be needed, he acknowledged, to employ an expected 5 million new jobseekers each year.

The Minister was speaking to an audience in Brussels organised at the Indonesian embassy by the Asia-Europe Project and the European Policy Centre September 3 on his return home from an Asia-Pacific meeting in Chile.

He added that the years between the financial and political turmoil and the current exercise in democracy had made strides in reform and restructuring of both the government and economic systems. He explained that these have encompassed bureaucratic, legal and agricultural reforms as well. The political upheaval has not only included the first direct popular election of a president, but also the establishment of a bicameral legislature and numerous other changes in relationships. “If stability had not been managed,” he underlined, “we could not have held the three elections in six months,” in 2004 for the parliament and presidency, involving some 500,000 candidates and 150 million voters. This process, he forecast will be maintained in 2005, when another major round of elections for governors and district chiefs throughout the vast country of 400 different ethnic communities.

Economically, he notes the telling statistic that in 2001 there were 6 million air passengers within the country, now the figure has skyrocketed to 16 million. But he also points to some legal and judiciary reforms, competitive bidding, budgetary discipline, stabilised exchange rate, noting proudly that Indonesia is the only ASEAN country with an anti-monopoly commission and the central bank “is like the Bundesbank.” Restructuring of the banking sector is three-quarters accomplished with more privatisation expected in 2005 and the creation of truly international banks. He also signals that the economy is now an open one, 55% dependent on international trade, and has been able to reimburse $8 billion of its huge debt back to the IMF.

But he also noted that the national budget could hardly be used for economic expansion, since one-third is reserved to transfer to regions, one-third to pay off debts, with much of the rest aimed at pro-poor projects and subsidies. Hopes for additional resources for expansion, he said, rely on increasing tax revenues or FDI. While he noted that a recent $500 million bond issue had been four times oversubscribed, he did not foresee other attempts on the markets unless the country’s credit rating was raised. But he said he hopes that the ASEAN Free Trade Agreement being implemented might provide some stimulus to the economy and infrastructure, adding nevertheless that substantial improvements would have to come in road, rail, communications and electricity infrastructure, especially in rural electrification. Major new harbours are being built or planned and new oil and gas fields have been discovered, promising some improvement. He said the country should also begin to capitalise on the geothermal energy potential from its high number of volcanoes. In general, he said he saw substantial potential for other renewable energies in view of the many islands and other isolated areas not connected to an electricity grid system.

He indicated at the time that he expected that should Susilo Bambang Judyhono be elected President that he could work with the newly-elected Parliament and take part in a growing public dialogue on issues and problems. He indicated that the process of restructuring and reform was as much as 80% completed and that “we cannot backtrack.”

Other analysts, however, differ on the health of the country’s economy, with some regarding it as fragile and flawed. Even some European investors and traders have complained regarding the lack of coherence and respects for laws, corruption, bureaucracy, customs, taxes, port congestion or lack of security in some areas.