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Indonesian Election Results Could Bring About Economic Changes - 2004-04-07

The first indications from Monday's general elections in Indonesia show that there will be a change in government. One source of discontent with the old administration was its economic policies.

Early vote counting shows that changes in Indonesia's political situation means that the international financial community might take another look at investing in Indonesia.

The hard-line Islamic parties did not do as well as some investors feared. In addition, the stranglehold on power held by the two big parties has been broken, offering fresh hopes that corruption problems might change.

Fauzi Ichsan, an economist with Standard Chartered Bank in Jakarta, says that investors will be reassured by the election outcome, but only if the winners can build solid coalitions. "The front-runners are market friendly, but in the end the government that is formed must have sufficient parliamentary support, which means sufficient coalition partners," he said.

Most of Southeast Asia has recovered from the financial crisis that hit the region at the end of the 1990s, but Indonesia is the exception.

Indonesia's economy has been growing about four to five percent a year, driven mostly by domestic demand, but economists say the expansion is not enough to sustain job growth. They say that foreign investment is crucial for economic development.

Mr. Ichsan says the new government must reassure international investors that reform, including programs to privatize state industries and tackle corruption, will continue.