CGI pledges $3.14b in loans<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
Creditors in the Consultative Group on Indonesia
\n(CGI) stood by their promise to support the country on Thursday,
\nas they pledged a total of US$3.14 billion in loans and $586
\nmillion in grants and technical aid to help cover the 2002 state
\nbudget deficit.<\/p>\n
\"The pledges indicate continued support for Indonesia at a
\ncritical juncture in its economic recovery, but at the same time
\nemphasize the importance of urgent and resolute policy action,\"
\nsaid World Bank Vice President for the East Asia and Pacific
\nRegion, Jemal-ud-din Kassum in a press conference following the
\npledging session of the eleventh CGI meeting in Jakarta Thursday.<\/p>\n
The CGI groups together Indonesia's 32 major creditors
\nincluding 21 countries and 11 multilateral lenders such as the
\nWorld Bank and the Asian Development Bank (ADB).<\/p>\n
Its loans will be used to help contain next year's state
\nbudget at 2.5 percent of gross domestic product (GDP).<\/p>\n
The ADB committed the largest amount with $1.15 billion,
\nfollowed by the World Bank with $1 billion and Japan with $720
\nmillion.<\/p>\n
Kassum said that of the $3.14 billion in loans, some $1.3
\nbillion was tied to progress on policy performance, concerning
\npoverty reduction and good governance.<\/p>\n
He reiterated that creditors had taken note of the slow
\nprogress so far on structural, legal and other institutional
\nreforms.<\/p>\n
Kassum added that in past years, disbursements had fallen
\nsignificantly short of pledged amounts due to poor policy
\nperformance on the part of the government.<\/p>\n
Despite showing an understanding of the daunting tasks facing
\nthe government, Kassum warned that \"inaction or a weak reform
\neffort will carry its own severe cost\".<\/p>\n
The financial market was heartened by the CGI loan pledge,
\nallowing the rupiah to extend a two-day rebound closing at Rp
\n10,485 per U.S. dollar Thursday compared to 10,638 on Wednesday.<\/p>\n
The eleventh meeting of the CGI ran under the theme of
\n\"working together to reduce poverty\", highlighting the urgency of
\ngovernmental reform to fight poverty.<\/p>\n
Coordinating Minister for the Economy, Dorodjatun Kuntjoro-
\nJakti said the government had outlined what he called a poverty
\nreduction strategy.<\/p>\n
\"A participatory process that will enable the poor to help
\nshape the policies that we will be implementing,\" he explained.<\/p>\n
In addition to a poverty agenda, other key reform areas cover
\nfiscal sustainability, development of small- and medium-sized
\nenterprises, good governance, improvement in the justice system,
\nproper forest management, a better education policy and more
\neffective aid distribution.<\/p>\n
On fiscal sustainability, Finance Minister Boediono said it
\nwould require extensive tax reform, accelerated asset sales under
\nthe Indonesian Bank Restructuring Agency (IBRA), and
\nprivatization of state enterprises.<\/p>\n
Addressing foreign investors' concerns, Boediono said the
\ngovernment was committed to \"resolving the remaining high-profile
\ncommercial disputes involving state enterprises to clear the air
\non investment issues.\"<\/p>\n
This year's CGI loan amount, however, marked a sharp decline
\nfrom last year's pledge of $4.7 billion.<\/p>\n
Underscoring this reduction, is not only a lower deficit
\ntarget for next year's state budget, but also an aim to reduce
\nfuture debt burdens, according to Finance Minister Boediono.<\/p>\n
For the first time the CGI also discussed corruption issues,
\nwhich the World Bank's Kassum said the government's response was
\npositive.<\/p>\n
He said the creditors also urged judicial reforms and the need
\nfor a comprehensive reform strategy with clear milestones to
\nestablish rule of law and reduce corruption in the courts.<\/p>\n
The World Bank has been championing lenders' anticorruption
\ncampaigns ever since it became apparent that a large portion of
\nits past loans had been abused.<\/p>\n
Minister Boediono said the government would do its utmost to
\nadhere to best management practices in the use of the loans.<\/p>\n
He promised revamping various transaction systems, including
\nthose at banks, to gradually adopt internationally-recognized
\nbest practices.<\/p>\n
Toning down the optimism a bit however was State Minister for
\nNational Development Planning, Kwik Kian Gie who said corruption
\nin Indonesia had become a key part of Indonesian life and
\nculture.<\/p>\n
\"I cannot promise you that some of this new debt will not be
\nmisused again as it was in the past,\" Kwik told CGI participants
\nin his speech.<\/p>\n
In spite of this, Japan signaled a strong vote of confidence,
\nas it pledged to provide more than one-third of all Indonesia's
\nexternal financing needs, estimated at around $7 billion this
\nyear.<\/p>\n
With only $720 million pledged through the CGI, much of that
\nsupport is likely to come through debt restructuring talks at the
\nParis Club meeting next year.<\/p>\n
The Japanese ambassador to Indonesia, Yukio Takeuchi said his
\ngovernment was ready to show flexibility during debt rescheduling
\ntalks with Indonesia.<\/p>\n
Major CGI creditors:<\/p>\n
(US$ billion):
\nAsian Development Bank (ADB), 1.15;
\nWorld Bank, 1;
\nJapan, 0.72;
\nOthers, 0.27;
\nTotal CGI loans pledged, 3.14.<\/p>",
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"sponsor": "Okusi Associates",
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