Hence, the budgeted cash cost to defray the interest costs of the government bonds to recapitalize the banks will in the end be borne by foreign aid. That is fortunate. Large subsidies are still given to public utilities to avoid shocks for the consumers, but such consumers are urban people not belonging to the poorest. But their advocates, e.g. the consumers union, parliament, NGOs, resist rate and price hikes for electricity, fuels, toll roads, telephone and public transportation. Perhaps they are right for this year, but will make the life of the new government next year very difficult.
T here are a few signs of incipient recovery in the real sector.
T he year 1998 was really a very bad year but the problem now is whether, on the margin, there are signs of pick-up. Provinces living from agriculture and commodity exports are doing well. Labor intensive exports of manufactures from Java are recovering, at least measured in capacity utilization. They can realize rupiah profits although in dollar terms bottom lines are often still dismal. But even manufacturing for the domestic market has shown some improvement in production and sale, for instance food processing, and other consumer s goods for daily use.