CGI pledges $2.8b for 2004<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The Consultative Group on Indonesia (CGI) pledged on Thursday
\nto provide US$2.8 billion in loans and grants for next year's
\nstate budget, but renewed calls to speed up reform and improve
\nthe investment climate.<\/p>\n
The amount was higher than the $2.7 billion promised for the
\ncurrent 2003 state budget, partly because of higher spending for
\ndebt repayment, as the expiration of the International Monetary
\nFund program later this month deprives the country of a debt
\nrelief facility from the Paris Club of creditor nations.<\/p>\n
In addition to the figure donors set aside $600 million in the
\nform of credit exports and technical assistance to regional
\ngovernments and non-governmental organizations (NGOs). That
\nbrings the total loan pledge from the CGI to $3.4 billion.<\/p>\n
During the two-day CGI meeting, while praising the country's
\nmacroeconomic and monetary stability, donors also stressed an
\nurgent need for the country to tackle corruption, which hampers
\nthe influx of investment and economic growth, putting a brake on
\npoverty eradication drives.<\/p>\n
As the must-take-action targets had been laid down in the
\nWhite Paper (a document containing the country's economic reform
\nplan until next year), the government now had to ensure the
\nreform targets were implemented, said the World Bank, which
\nchaired the meeting.<\/p>\n
"If the government can deliver on its commitments it has
\nmade ... then growth in Indonesia is set to take off," World Bank
\nEast Asia and the Pacific vice president Jemal-ud-in Kassum said
\nin a written statement.<\/p>\n
"But significant slippage, especially in improving the
\ninvestment climate and governance, would put emerging gains in
\nmarket confidence at risk," he warned.<\/p>\n
The Asian Development Bank (ADB), which provided around $900
\nmillion of the loan pledges, also urged intensified action to
\nreduce corruption to boost investment.<\/p>\n
"Weak governance has acted as a major barrier to sound
\ndevelopment in Indonesia, nurturing corruption and rent-seeking
\nand weakening the impact and effectiveness of development
\nprojects," ADB Southeast Asia deputy director Shamshad Akhtar
\nsaid.<\/p>\n
Indonesia badly needs fresh investment in order to generate
\nhigher economic growth. Foreign direct investment (FDI) approvals
\nfor instance, are currently at only a quarter of the pre-economic
\ncrisis levels.<\/p>\n
"To achieve higher growth, Indonesia should shift its economy
\nfrom consumption-led to investment-led growth and for that,
\nimproving the investment climate is a matter of urgency," said
\nJapanese Ambassador Yutaka Iimura.<\/p>\n
The Japanese government contributed $660 million in the CGI
\nloan pledge. On top of that, it would also set aside $220 million
\nin export credit, bringing the total lending from Japan to $880
\nmillion.<\/p>\n
The CGI has been one of the crucial financing sources the
\ncountry has always turned to to help it plug the annual state
\nbudget deficit.<\/p>\n
Under the 2004 state budget, the government set its sights on
\nproceeds to finance the deficit from; domestic and global bonds
\nsales; privatization; sales of banks and assets under the
\nIndonesian Bank Restructuring Agency (IBRA); bank financing; and
\nloans from foreign lenders -- mostly the CGI.<\/p>\n
The budget has targeted the deficit at Rp 24.4 trillion, or
\n1.2 percent of the country's gross domestic product (GDP), as
\ncompared to the estimated Rp 34.4 trillion (1.8 percent) deficit
\nfor this year.<\/p>\n
Of the total CGI loan pledge, the disbursement of $1 billion
\nwill depend on progress in implementing economic reforms.<\/p>",
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