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ECONOMIC AFFAIRS

CPI EXPECTED UP 8.1% ON YEAR
     Indonesia's consumer price index likely rose 8.1% in October from a year earlier, largely due to a 12% fuel price hike which came into effect that month, analysts said.   The rupiah's weakness, which has pushed up the cost of imported goods, and the low base effect of last year will also contribute to higher inflation,  analysts said.   "We're looking for a rise in October of 1.3% month-on-month, that would lift it up by 8.2% year-on-year, boosted by the uptick in fuel prices," said David Cohen, analyst at market consultants Standard & Poor's MMS International.

EVIDENCE OF RECOVERY

	2nd quarter 2000 GDP up 4.13% from same quarter in 1999.
	Non-oil exports up 27% for first 7 months of this year compared to 2000.
	Trade surplus in July rose to a record $2.86 billion
	Industrial electricity usage, a good indicator of production was up 11% for first 7 months of 2000 over a year ago.
	Auto sales up 400%, now back to 1996 levels.  Motorcycles grew 85%.
	FDI approvals for Jan-July 2000 totaled $6.09 billion and may eventually exceed 1999 total of $10.9 billion

LAKSAMANA'S VIEW OF RECOVERY
    Former Minister of State Enterprises Laksamana Sukardi, is now back advising his party PDI-P.  He's also launched his own website, Laksamana.net providing analysis of political and economic affairs. Here's Laksamana's view of Indonesia prospects for recovery.
     "Good governance is the "precondition" for Indonesia's recovery. Some Indonesians have been foolishly arguing that the economy needs to recover first, then we can begin to tackle the tough political issues like corruption and strengthening the rule of law.
But in fact the sequence must be reversed. We must make clear and even  radical progress first on good governance, and then the economic recovery will have a foundation upon which to begin.  We cannot build the upper structures of a building if the foundation is weak or non-existent. This was the fundamental flaw of Soeharto's New Order. There was an illusion of stability for a very long time. But in fact, everything depended on the stability of a single man and his circle of civilian and military cronies. He built a tall building without a solid foundation, and it is not surprising that the building collapsed.  Indonesians can debate endlessly about what model or specific policies are best to bring recovery to the economy. But such discussions are pointless if a conducive environment for implementation is not in place as a necessary precondition.  For example, the specifics of a debt restructuring plan are not nearly as important as having the whole process be transparent. Transparency builds confidence. It guarantees fairness. It builds legitimacy and trust.  Recent bailouts of major debtors have been done in secrecy. The public is only told of the outcome, and nothing is known of the process or negotiations. Things like cash-flow analyses and asset valuations were not scrutinized by independent auditors.
         The president has it within his power to take the steps the country needs, to set a clean and firm example for his own presidency, and to push his ministers and high officials to produce concrete results on KKN and legal
reform."

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CONSUMER NEWS

FARQUHAR STIRLING: CONSUMER MARKET UP

         Farquhar Stirling, President Director of AC Nielsen Indonesia, told an AICC audience on September 13 that consumer spending power had recovered following the financial crisis and political upheavals of 1997 and 1998.   In contrast to the headlines,

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