RI will be more stable than India, Malaysia and Thailand in 2009

The Jakarta Post, Jakarta | Tue, 10/28/2008 9:41 PM  

With concern setting in about the declining rupiah and share prices, there is good news yet: Indonesia next year will be much more stable than regional peers India, Malaysia and Thailand, a Hong Kong-based political risk consultancy said Monday. 

"Indonesia is much more stable today than it was when the regional financial crisis hit in 1997-98. The coming election campaign is likely to see the present government return, with (President Susilo Bambang Yudhoyono) winning the presidency and keeping Jusuf Kalla as his vice president," the Political & Economic Risk Consultancy (PERC) said in a report, whose executive summary is available on PERC's website. 

Source: PERC

Following a massive crackdown on alleged terrorist group Jamaah Islamiyah in recent years, coupled with improving social conditions, Indonesia seems almost guaranteed of stability. But the threat of terrorism is still a factor, PERC warned. 

"There is still a possibility of more terrorist incidents, but overall social conditions are more stable now than at any time in a decade," it said. 

PERC assessed 16 countries in its Asian Risk Prospects -- 2009 on factors such as the risk of racial and communal tensions, struggle for power, the threat posed by social activism, and vulnerability to policy changes by other governments. 

Indonesia, Southeast Asia's biggest economy, rated as the fourth least stable country in the region, with a score of six on a scale of 10, in which zero represents the best socio-political conditions and 10 the highest risk. 

South Asian behemoth India topped the table with the highest political and social risk, scoring 6.87, mainly because of internal and external instability. PERC cited fears over Pakistan, a major player in the global war on terror. 

"India faces some of the biggest risks in 2009 because of uncertainties surrounding the coming general election, rising communal violence and terrorism incidents. 

"The biggest risk is that a deterioration in political and economic conditions in neighboring Pakistan could aggravate social unrest in India further and hurt national security," PERC said. 

Thailand is pegged to be the next least stable country in Southeast Asia next year, scoring 6.28, as the current political mayhem and the separatist violence looks set to run into 2009. 

Surprisingly, Malaysia, which escaped much of the wrath of the 1997 financial crisis, will be the third least stable in the region, with the report noting the political wranglings were aggravating racial and religious tensions. 

"The status quo is changing in ways that will see a stronger political opposition than in the past and UMNO (the ruling party) forced to share more power with non-Malay groups," the report said. 

But these three countries could be relatively immune to the global financial fallout. 

"India, Thailand and Malaysia are not so much vulnerable to negative fallout from the global financial crisis as they are to factors that are mainly internal," Robert Broadfoot, PERC managing director, told Reuters on Tuesday. 

"For these countries, the coming global economic storm is only going to make a bad situation worse," he said. 

The tightly controlled city-state of Singapore was ranked the most stable country, boasting an extremely low political risk in 2009, though its economy is expected to take a big hit from the financial crisis as it heads toward recession. 

This is expected to mirror the current situation in the United States, badly weakened economically and psychologically. 

"It is a humbling experience that, coinciding with a change in government, is likely to see the U.S. become less aggressive in pushing its views on other countries," PERC said. 

With a score of 5.33, China will have a tough year economically in 2009 but not a disastrous one. 

PERC is a consulting firm specializing in strategic business information and analysis for companies doing business in East and Southeast Asia.