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Business bets on Jakarta victor

Investors were optimistic that former general Susilo Bambang Yudhoyono has won a landslide victory in presidential elections and would kick-start needed economic reforms.

"The market has seen Yudhoyono as a force that could make some of these reforms come about," economist David Fernandez with J.P. Morgan Chase in Singapore said yesterday.

Markets will likely also benefit from the peaceful polling across this 13,000-island archipelago, which proved the world's most populous Muslim country can hold a smooth and organized democratic election.

At midday, the Jakarta Stock Exchange Composite index was up 0.6 percent, or 4.8 points, at 819.443, down from an intraday record high of 829.571. Traders expect the main index to end above the previous all-time closing high of 818.159 points.

The US dollar fell 0.6 percent against the Indonesian rupiah currency. The dollar was at 8,977 rupiah, down from its close Friday at 9,030 rupiah.

But the gains may be short-lived. Markets are expected to soon shift their attention to the challenges facing Yudhoyono, analysts said. These include a potentially hostile parliament and an entrenched political elite that could fight a rearguard action to block reform.

Foreign investors will also be keen to see whom Yudhoyono appoints to key economic jobs in his Cabinet. That might not become clear before Oct. 20, the date set for the formal presidential inauguration. An official election result is due Oct. 5. Yudhoyono has so far sketched only a vague outline of policies he will follow.

With nearly half the votes counted early yesterday, Yudhoyono had about 60 percent to President Megawati Sukarnoputri's 40 percent, according to the General Election Commission.

Indonesia's economy will grow about 5 percent this year, but, unlike many other Southeast Asian nations, it has failed to fully recover from the 1997-1998 regional financial crisis.

Many foreign investors have stayed away, put off by Megawati's failure to tackle corruption and push through reforms needed to restore economic health.

Yudhoyono, although he served as Megawati's security chief before challenging her for the presidency, has distanced himself from her administration, promising to fix the sluggish economy, crack down on rampant graft and provide jobs for the country's 210 million people.

He is viewed as an economic pragmatist, analysts said, and his victory is expected to be welcome by Indonesian-Chinese investors, who may now put money back into the rupiah and stocks from offshore accounts.

Despite Yudhoyono's popularity with voters, who see him as offering a fresh start, he lacks a well-organized political machine.

Yudhoyono has shown some signs he's willing to take on the elite that ruled Indonesia for 32 years under Suharto and which has largely remained in place despite the emergence of a democratic system. Last week, Yudhoyono said he would punish former bank owners who misused US$16 billion in emergency loans during the Asian crisis but have so far paid back only a fraction of that amount.

The new president's Cabinet appointments will give an early sign of what policies Yudhoyono will follow, Fernandez said.

Many hope Finance Minister Boediono will remain in his position after helping steer Indo-nesia's government finances from the brink of bankruptcy in the past few years. Economists credit Boediono as the architect of the main achievement of Megawati's government, allowing the country to graduate this year from its IMF emergency borrowing program.

Also of keen interest internationally will be whether the new president retains oil minister Purnomo Yusgiantoro, who also is currently serving as OPEC's president.
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