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Analysts, markets critical of Indonesia's new Cabinet

In this story:

Harsh response

Newspaper: 'Mediocre Cabinet'

Controversial appointment


JAKARTA, Indonesia -- As financial markets reacted negatively to Indonesia's new Cabinet, Vice President Megawati Sukarnoputri's office denied reports that she would resign the government in protest against the appointments.

Reports that Megawati planned to quit because the new Cabinet didn't include more members of her party had circulated on Thursday throughout Indonesia's financial and commodities markets.


"That is not true," said a spokesman from Megawati's office. He said she was carrying out her duties as usual.

Indonesian President Abdurrahman Wahid -- trying to streamline the Cabinet and make it more effective -- reshuffled his ministers on Wednesday. The new Cabinet was cut to 26 ministers from 35. Sixteen ministers were carried over from the previous Cabinet.

Indonesia's financial markets expressed concern over Megawati's reported unhappiness with the new Cabinet. She has been expected to manage the Cabinet under a power-sharing arrangement with Wahid. Megawati was not present when the Cabinet was named.

Harsh response

The markets' response was harsh. The rupiah fell to between 8,440 and 8,480 to the dollar, compared to nearly 8,000 before the new Cabinet was named. Meanwhile, Jakarta's main stock index slipped nearly three percentage points.

"The new Cabinet was dominated by people known more for their closeness with Gus Dur (Wahid's nickname). I'm afraid this could lead to direct confrontation with the other leading political parties, especially PDI-P," said one international broker.

PDI-P is the Indonesia Democratic Party-Struggle, which is headed by Megawati, and which has the largest grouping in parliament, or the People's Consultative Assembly.

Market traders expressed particular concern over Prijadi Praptosuhardjo's appointment as finance minister.

Prijadi, a low-profile banker who has spent most of his career with the state-run Bank Rakyat Indonesia, had earlier failed a "fit and proper" test when Wahid nominated him to head the central bank, disqualifying him from that post.

Newspaper: 'Mediocre Cabinet'

"The Cabinet does not reflect a sense of crisis. (Wahid) has not tried his best to look for the brightest minds in this country," Media Indonesia daily said in an editorial on Thursday.

"This is a mediocre Cabinet," the daily said.

Wahid has been criticized in recent months for his management of daily governmental affairs, and for his inability to revive the nation's economy and end religious and separatist strife in various regions of the country.

Earlier this month, Wahid promised -- under intense pressure from the nation's legislators who were critical of his management style -- that he would name a government that would be more effective. He had also agreed to let Megawati oversee the government's day- to-day affairs.

Under Wahid's plan, Megawati will be assisted by two coordinating ministers -- Susilo Bambang Yudhoyono, a retired general who will be the new chief politics minister; and Rizal Ramli, the chief economic minister.

In addition to the coordinating ministers, the new Cabinet is composed of 16 ministers, five state ministers and three junior ministers.

Controversial appointment

Some controversy surrounded Ramli's appointment, as some analysts questioned his enthusiasm for reforms agreed with the International Monetary Fund, which has been leading international efforts to revive Indonesia's economy.

Ramli has been critical of IMF-sponsored economic reforms in Indonesia.

Despite that, several analysts said Ramli was probably the right person for the job, and that he would be able to maintain better control over the economic ministries than had occurred under the previous administration.

"Politically, he is very skilful and I think he will be a good coordinator in that sense. I think technically he lacks expertise, but that is not too important as long as he gets good people," said one economist.

Wahid surprised the pundits, however, when he chose Mahfud Md, a professor at the Islamic Indonesian University, to assume the defense ministership and Purnomo Yusgiantori to replace Yudhoyono as mines and energy minister. Neither has high-level government experience, but analysts expressed confidence.

Among the other appointments, Attorney General Marzuki Darusman, Foreign Minister Alwi Shihab, armed forces commander Admiral Widodo, Interior Minister Surjadi Judirja, Housing/Regional Infrastructure Minister Erna Witoelar, Law/Human Rights Minister Yusril Ihza Mahendra, Trade/Industry Minister Luhut Pandjaitan and Transportation/Communications Minister Agum Gumelar retained their seats.

Jakarta Bureau Chief Maria RessaandReuters contributed to this report.


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