IMF sets conditions for loan disbursement<\/p>\n
WASHINGTON (Dow Jones): The International Monetary Fund
\ncontinues to insist that Indonesia make substantial steps toward
\nresolving a high-profile banking scandal case before the Fund
\nwill consider disbursing additional financial assistance to the
\ncountry, IMF Asia-Pacific director Hubert Neiss said Tuesday.<\/p>\n
Speaking at a press conference on the sidelines of the annual
\nmeetings of the IMF and the World Bank, Neiss reiterated the four
\nmain demands the Fund is making of Indonesia for dealing with the
\ncase surrounding alleged illegal payments by Bank Bali.<\/p>\n
Those are: that Indonesia conduct an independent
\ninvestigation, that it make the results of that investigation
\npublic, that it prosecute any illegal acts made in the case and
\nthat measures are taken within the government and Bank Indonesia,
\nthe central bank, to ensure that such scandals won't recur.<\/p>\n
The case relates to an US$80 million payment by PT Bank Bali
\nto a firm linked to the ruling Golkar party, ostensibly for debt-
\ncollection services relating to some outstanding government-
\nguaranteed loans.<\/p>\n
The issue was first raised when Standard Chartered Plc
\ndiscovered a hole in Bank Bali's books during a due-diligence
\nreview conducted in advance of the British bank's planned
\npurchase of a 20 percent stake in the Indonesian bank.<\/p>\n
After that, the Indonesian government, bowing to domestic and
\ninternational pressure, commissioned an audit of the transaction
\nby PricewaterhouseCoopers. That report has been completed but the
\ngovernment has refused to release it in full, prompting a call
\nfrom IMF Managing Director Michel Camdessus for Indonesia to
\npublicize its findings.<\/p>\n
At the same time, Neiss stressed that the IMF is still in
\nconsultation with the Indonesian government, even though the Fund
\nhas suspended a scheduled country review, effectively putting on
\nhold the release of the next tranche of a $12.1 billion IMF loan
\npackage signed in 1997.<\/p>\n
\"It is important to emphasize that the IMF has not cut off
\nrelations with Indonesia,\" Neiss said. \"All that the IMF has done
\nis suspend program discussions until conditions are appropriate
\nto conduct those discussions.<\/p>\n
\"We maintain contacts with the government at all levels and we
\nare working with the government to get a speedy resolution of the
\nBank Bali case.\"<\/p>\n
But Neiss also said that negotiations will inevitably be on
\nhold until after presidential elections are concluded in
\nNovember. The time constraints posed by a potential change in
\nadministration mean \"it is not physically possible to negotiate
\nanother letter of intent,\" he said.<\/p>\n
The Indonesian delegation to the IMF and World Bank meetings
\nthis year is led by Bank Indonesia governor Sjahril Sabirin. The
\ngovernor was one of seven officials called upon last week by the
\nIndonesian parliament to step down so that an investigation can
\nbe conducted into their involvement in the Bank Bali case.<\/p>\n
Neiss also defended the IMF's role in helping the
\ninternational community exert pressure on Indonesia so that
\nJakarta accepted a peacekeeping mission in the violence-wracked
\nprovince of East Timor earlier this month. Shortly after IMF
\nofficials made frank statements of concern about Indonesia's
\nreluctance to cooperate, the government agreed to let the
\npeacekeepers into East Timor.<\/p>\n
Neiss made it clear that the Fund, in its responsibility to
\nits 182 member countries, had a strong intrinsic interest in such
\ncases of international diplomacy.<\/p>\n
\"This is a humanitarian issue. If people are suffering, none
\nin the world community, including the IMF, can be indifferent,\"
\nNeiss said. \"Secondly, it is important to understand that the IMF
\ncan only be effective (to the extent) that it has the broad
\nbacking of the international community.\"<\/p>\n
Neiss didn't sound especially concerned about an expected
\ndelay in the government-run Indonesian Bank Restructuring
\nAgency's plans to dispose of Rp 17 trillion ($2 billion) in
\nassets this year. Those assets, which came under its control as a
\npart of a scheme to recapitalize the country's distressed banking
\nsector, must have their value preserved, he said.<\/p>\n
After a recent sharp fall in the rupiah and an apparent loss
\nof confidence in Indonesian markets among foreign investors, most
\nanalysts doubt that IBRA can meet its targets. They expect that
\nIBRA will wait for a recovery in confidence before it moves to
\nsell the assets, so as to maximize proceeds.<\/p>\n
Despite such concerns, Neiss expressed moderate optimism about
\nIndonesia's prospects.<\/p>\n
He explicitly included the country in a generally positive
\noverview of the Asian region's recovery from the financial crises
\nof 1997 and 1998.<\/p>",
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