CGI pledges loans, urges govt to rev up reform<\/p>\n
Dadan Wijaksana, The Jakarta Post, Nusa Dua, Bali<\/p>\n
The Consultative Group on Indonesia (CGI) promised to provide the
\ncountry with a higher than requested loan facility, but urged the
\ngovernment to be serious in implementing reform programs to
\nattract flagging investment.<\/p>\n
At the end of a two-day meeting on Wednesday, the grouping of
\n30 bilateral and multilateral donors agreed to provide US$2.7
\nbillion in fresh loans, higher than the government's request of
\n$2.65 billion, to help finance the 2003 state budget deficit.<\/p>\n
\"The investment climate is the most significant obstacle to
\naccelerating (economic) growth from the recent rather modest
\nrates, and thus for reducing poverty and vulnerability,\" said
\nJemal-ud-din Kassum, World Bank Vice President for East Asia and
\nthe Pacific region and also the chairman of the CGI forum.<\/p>\n
Improving security, strengthening the justice sector, reducing
\nbureaucracy and red tape, maintaining labor market flexibility,
\nreducing uncertainties caused by regional autonomy and avoiding a
\nsevere power crisis, are top on the list of things that the
\ngovernment needs to do.<\/p>\n
Foreign direct investment approvals fell to $7.2 billion in
\nthe first 11 months of last year from $8.4 billion in the same
\nperiod the previous year. The decline in domestic investments was
\neven steeper.<\/p>\n
The country's economic growth has been largely driven by
\ndomestic consumption since it was hit by the late 1990s economic
\ncrisis. But experts have said the resulting growth rates of less
\nthan 4 percent were not enough to provide sufficient jobs for
\nsome 2.5 million people entering the job market each year. The
\ncountry must achieve a pre-crisis growth rate of more than 6
\npercent. This means that investment and exports must become the
\nleading engines of growth.<\/p>\n
Higher economic growth is crucial to helping reduce the number
\nof poor people in the country, which last year stood at around 16
\npercent of the total population of more than 210 million.<\/p>\n
The country's traditional foreign donors also demanded that
\nthe government redouble its reform efforts in other areas,
\nincluding the judicial system, and curb illegal logging.<\/p>\n
\"They noted that the continuing weakness of the legal and
\njudicial system undermined efforts to deal with systemic
\ncorruption, to encourage investment, to deal with illegal logging
\nand to ensure the basic rights of Indonesians,\" the World Bank
\nsaid in a statement.<\/p>\n
The donors asked the government to work hard in these areas,
\nas hard as it had worked in dealing with terrorism.<\/p>\n
The CGI praised the government's response to the Oct. 12
\nterrorist bombing incidents in Bali that killed some 190 people,
\nmostly foreign tourists.<\/p>\n
The pledged sum is the lowest since the 1998 economic crisis.<\/p>\n
\"This is good news as it means that Indonesia's need for
\nforeign budget financing is diminishing,\" Kassum said.<\/p>\n
There has been strong pressure on the government to lessen the
\ncountry's dependency on foreign loans.<\/p>\n
The CGI loans comprise $1.1 billion in program and project
\nloans, and grants worth $1.6 billion. Japan, the World Bank and
\nthe Asian Development Bank (ADB) accounted for most of the
\npledges.<\/p>\n
On top of this, donors will also provide $400 million in
\ntechnical assistance, grants to the regions and grants to non-
\ngovernmental organizations.<\/p>\n
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
\nJakti said that the CGI loans would be used to help finance this
\nyear's budget deficit, which is projected at around 1.8 percent
\nof gross domestic product.<\/p>\n
The remaining financing needs would come from the sale of
\nassets controlled by the Indonesian Bank Restructuring Agency
\n(IBRA), and privatization proceeds.<\/p>\n
Elsewhere, Dorodjatun said that the next CGI meeting was
\nexpected to take place in early November.<\/p>\n
Meanwhile, the CGI loan pledge failed to benefit the rupiah.
\nThe local unit ended flat at Rp 8,885 per U.S. dollar on
\nWednesday. In fact, the central bank had to intervene in the
\nmarket to defend the local unit, dealers said.<\/p>",
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