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and SAYURI DAIMON

Staff writers

Indonesian President Suharto’s resignation Thursday brought a sense of relief both to the Japanese government and the business community, but uncertainty remains over the economic future of the Southeast Asian giant.

The transfer of power from Suharto to second man Bacharuddin Jusuf Habibie, a move in line with the Indonesian Constitution, appears to have been received calmly by university students, signaling that the worst of the civil unrest is now over. “We were concerned about how things would turn out on May 20, but the worst-case scenario has been avoided,” said Osamu Watanabe, vice minister for international trade and industry.

While acknowledging the substantial economic damage caused by the turmoil, Watanabe expressed hope that financial support from international organizations and the Japanese government will proceed in due time. The lull in the immediate crisis, however, is unlikely to bring a quick end to the ongoing economic turmoil, and some economists predict a further deterioration in the nation’s economy. “Things will gradually recover in the post-riot situation, but this does not mean that economic activities will return to normality,” said Kazuo Mishima, senior economist at the Japan Research Institute’s Center for Asian Research.

“The question is what policies the new government under President Habibie will pursue,” he said, pointing out that continuing economic reform is the precondition for bringing stability to the economy. Indeed, Japanese companies, which have a large economic stake in Indonesia, are mostly cautious about resuming local operations.

“I hope Suharto’s resignation will stimulate the Indonesian economic recovery as well as the overall Southeast Asian economy,” said Hiroshi Okuda, president of Toyota Motor Corp. Okuda acknowledged that it is still too early to determine the best time to resume Indonesian operations.

Aiwa Co., which has suspended operations at its two Indonesian factories, also intends to wait. “We’ve not changed our basic stance on Indonesia, which is important both as a market and as a key production base in Asia,” said a spokesman for the company. “But I expect it will take a while before things calm down (to the point of allowing normal business activities).”

Some observers are also concerned about political stability. It is widely perceived that Habibie, a German-educated engineer, does not have solid support from Indonesia’s all-powerful military. His stance on economic policy is uncertain, given his involvement in aviation projects, which the IMF firmly opposes.

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