Government soon to complete reform targets<\/p>\n
JAKARTA (JP): Coordinating Minister for the Economy, Finance
\nand Industry Kwik Kian Gie expressed optimism on Monday all
\nreform targets agreed to with the International Monetary Fund
\nwould be achieved before Thursday's deadline.<\/p>\n
\"There are several items that we haven't completed yet under
\nthe letter of intent, but we are sure that we can complete them
\nby July 20,\" Kwik said before attending the weekly meeting of
\neconomic ministers.<\/p>\n
Kwik said among the tasks that still needed to be completed
\nwas the recapitalization of Bank Bali, which the government
\nannounced late on Monday it would begin. The announcement came
\nfollowing a meeting with the bank's former owner, Rudy Ramli.<\/p>\n
The bank's recapitalization has been delayed due to a loan
\nscandal that erupted last year. The scandal centers on the
\ntransfer of US$80 million under a questionable cessie agreement.<\/p>\n
Other tasks outlined in the latest letter of intent (LoI) with
\nthe IMF concern the recapitalization of Bank Negara Indonesia
\n(BNI) and Bank Rakyat Indonesia (BRI).<\/p>\n
Kwik said the deadline on Thursday was the government's
\ninternal deadline, and the disbursement of the IMF's loan would
\ndepend on the approval of the fund's board.<\/p>\n
Compliance with the LoI is prerequisite to obtaining the IMF's
\nloan package, which totals $5 billion, to finance the country's
\neconomic recovery.<\/p>\n
The government failed to meet this year's first LoI deadline
\nin April, causing a delay in the IMF's disbursement of $400
\nmillion. Indonesia obtained the funds after meeting the
\nrequirements of a second LoI in May, but another failure to meet
\nthe deadline would cause the delay of the third loan tranche,
\nscheduled for August.<\/p>\n
Possible delay<\/p>\n
Economist Arif Arryman from the consultancy firm ECONIT also
\nexpressed optimism the government would meet the targets laid out
\nin the third LoI on deadline. However, he warned that rising
\npolitical uncertainty could prompt the IMF to delay its third
\nloan disbursement.<\/p>\n
Arif was referring to the upcoming General Session of the
\nPeople's Consultative Assembly in August, during which President
\nAbdurrahman Wahid is expected to appear before the Assembly to
\nreport on the progress he has made in leading the country.<\/p>\n
Arif also said the President's intention to reshuffle his
\nCabinet after the General Session was a good opportunity to
\nrevise Indonesia's relation with the IMF, which he accused of
\nfocusing more on Indonesia's debt repayment capacity rather than
\nthe country's economic recovery.<\/p>\n
According to him, the IMF was bound to the interests of donor
\ncountries which needed assurances of Indonesia's capability to
\nrepay its debts. \"Economic policies such as those contained in
\nthe LoI are inseparable from IMF's aim to raise our debt
\nrepayment capacity,\" Arif said during a media conference.<\/p>\n
To that aim, he said, the fund's LoI focused on a tight
\nmonetary policy that restricted government spending. \"This policy
\nhurts economic development .... The IMF is not overly concerned
\nwith demands for a quick economic recovery.\"<\/p>\n
Such a lack of attention, he said, was visible in the fund's
\neconomic growth target, which was between 1 percent and 2
\npercent. \"Only after protests from economists did they revise the
\ntarget to between 2 percent and 4 percent.\"<\/p>\n
He also said the LoI was inadequate to stimulate economic
\ngrowth and lacked attention to creating job opportunities and
\ndeveloping the agricultural sector, issues that effect
\nIndonesians at large.<\/p>\n
He said that because the LoI did not contain any reform
\nprograms that touched on these sectors, the IMF should refrain
\nfrom designing economic policies for industrial sectors.<\/p>\n
He also said the IMF had failed to help stabilize Indonesia's
\nmonetary condition, with the rupiah sharply depreciating.
\nAlthough the depreciation of the rupiah was mainly caused by
\npolitical uncertainty, he said, the fund should have learned from
\npast experience in South America, where it was shown that
\npolitical transitions were bound to cause sharp currency
\nfluctuations.<\/p>\n
\"The IMF should have from the beginning applied a monetary
\npolicy that is more resistant to the volatile political
\nconditions,\" he said.<\/p>\n
Arif said the IMF should have considered using a partial
\ncurrency control for Indonesia. \"The IMF therefore must handle
\nthe issues that fall under its core competence, which is
\nmacroeconomics and monetary policies.\"<\/p>\n
He said policies concerning industrial sectors, such as the
\nbanking and telecommunication sectors, should not be included in
\nthe LoI. \"If we need assistance in reforming our industrial
\nsectors, we must refer to institutions that have competence in
\nthese fields, like the World Bank or the Asian Development Bank.\"
\n(bkm)<\/p>",
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