**WAa/'s needed are real punishments that might discourage wrongdoing by government officials, ana brave judiciary to carry them out. The challenge for the next government, as opined by ana-lysts, will be to find the courage to apply the law.

Indonesia's democratic election created enormous optimism that economic recovery was Just around the corner. The present reality is that huge obstacles lie ahead and a new era of populist politics could complicate decision-making, as observed by analysts.

Jakarta's politicians fell all over themselves when International Monetary Fund Managing Director came to visit Jakarta last June. Presidential candidate Megawati Sukarnoputri and the incumbent B J Habibie, both pledged fealty to the Fund's economic-recovery blueprint and silenced dissenters in their camps. "No matter who leads Indonesia's next government, the IMF has a firm hand on the tiller." the World Bank Managing Director who visited Jakarta subsequently declared. “The theme is continuity."

However, softer voices could be heard warning that the job was far from finished and about to be seriously complicated by Indonesia's political transition.

The newly elected parliament is an unshackled one — able for the first time in decades to propose legislation of its own and may be even see it become law. This new power promises to make it a rambunctious body, with all members under pressure to deliver goodies to voters who have suffered from job losses, rampant inflation and high anxiety for two years. While law makers can also be-gin to clean up endemic corruption and government waste — a process that is key to the country's long-term economic survival — economists and politicians say the drive to reach consensus on economic policy is likely to be a messy one that may constrain short-term growth.

Observers feel the next president almost certainly — Megawati or Habibie — wilf confront populist and legislative challenges like no one has faced since Megawati's father and Indonesia's first president, Sukarno, dispensed with

democracy 40 years ago. The agenda for economic and political reform confronting Indonesia following the recent crisis bears "comparison with the magnitude of the reform effort undertaken by Russia following the fall of the Berlin wall." commented.a keen analyst attached to a UN agency.

To date, it has been noted by observers that precious little progress has been made towards repairing insolvent banks and restructuring massive foreign commercial debt — two key con-’ tributors to the economic col-, lapse — and the new populist politics are unlikely to quicken the pace. 'The proximate causes of the economic crisis have not yet been addressed." said a top World Bank official. But it was noted by observers that the IMF and the small group of local economists who have had Habibie's ear and pushed for progress in these areas will now have to talk over a growing chorus of voices trying to pull the government away from the Fund's reform agenda.

A wide spectrum of Indonesians want the economy fixer!, but they want their interests looked after, too. On labour issues, there are arguments for and against wage freeze advanced by opposing labour leaders. Government subsidies are another contentious issue. While the poor sections of society want the subsidies to continue, Indonesia's Finance Minister is lobbying to lift the country's gas and electricity subsidies, as demanded by the IMF. The role of foreigners in Indonesia is another sore point. While a trade group named the Real Estate Association of Indonesia warned. "We must prevent foreign control over the country's property sector" and suggested that property assets seized from failed banks be given to that trade group for management, there has been no unanimity of opinion on the issue.

Striking a balance among all these competing interests is considered by observers to be vitally important, since the economists estimate that In-

donesia needs to grow at 4 per cent to 5 per cent a year just to absorb new entrants to the work force. But there are pessimistic forecasts that Indonesia could easily be locked into a 2 per cent-3 per cent growth scenario for a decade if there is no pushing forward. That would expand the ranks of the poor, already estimated to be 20 per cent of the country's 200 million people.

From the IMF's viewpoint, these are the things that need be done: building a strong banking system, restructuring $65 billion in corporate foreign debt, winning back the confidence of domestic businessmen, particularly ethnic Chinese scared away by attacks, giving more financial autonomy to the provinces and ending too-cosy relations between business and government that allowed corruption to flourish under Suharto.

It's a very daunting task, as felt by observers. Dozehs of interviews with policy-makers, multilateral agencies and business people revealed a collective concern that an immediate return to high growth isn’t possible. If recovery means return to annual growth of 7 per cent, the average during the decade before the crash, most see it five years down the road.

Many economists and politicians across the political spectrum have made building a real, functioning democracy the country's top priority. They acknowledge that it will be difficult to fully address the huge economic problems at the same time. That means widespread expectations that economic growth will soon return to previous levels are unlikely to be met.

. The first test will come as the effort to clean up Asia's sickest banking system makes a move. Under Suharto. Indonesia's banks had evolved into little more than, personal finance vehicles for their owners and the politically powerful. After Suharto's fall, government nationalised most of the banks and now controls 85 per cent of the system by assets. The

Indonesian Bank Restructuring Agency, or IBRA, is spending $85 billion, mostly by issuing government bonds, to rebuild the banks: and stripping out for repacking and sale the roughly 75 per cent of their loan books that are nonperforming. IBRA also plans to sell assets pledged as collateral, but the process is only just beginning. And it has run up against interference from everyone from nationalist politicians to vested business interests — and experienced scandals within its own ranks.

Another festering problem is the $65 billion in overdue corporate debt that is blocking new capital inflows and the revival of the banking system. Indonesia has made less progress with the problem than any of Asia's-fallen tigers.

Asked what should be at the top of the country’s fix-it list. Indonesia's economic minister ticked off the following: More transparency; accountability and better governance. "If we can do that", he said. ”we can get back to 5 per cent-6 per cent growth in three years. "But there is an almost total abser.ce of administrative or legal sanction for high officials. No high-level government official has been prosecuted, let alone convicted. on charges of corruption or abuse of power within memory.

This is where democracy should come in. Opposition leaders see newly unleashed and unmuzzled political parties. non-government organisations and the media as key watchdogs that will help constrain the bad behaviour of once-untouchable officials. But that won't be enough, as observers feel. In their opinion, what's needed are real punishments that might discourage wrongdoing by government officials. and brave judiciary to carry them out. The challenge for the next government, as opined by analysts, will be to find the courage to apply the law for Hie first time in modem Indonesian history even when It has to turn that law on some of its friends.