Indonesia aid plan seen lifting world confidence<\/p>\n
NEW YORK (Reuters): The IMF's aid package to Indonesia came at
\nthe right time to help boost confidence in global financial
\nmarkets, though it may not be enough to put to the region back on
\ntrack, U.S. analysts said on Friday.<\/p>\n
Earlier, the International Monetary Fund pledged US$23 billion
\nin funds to be paid by IMF, the World Bank and the Asian
\nDevelopment Bank. The United States and other nations have
\noffered additional help, which could raise the total package to
\nsome $30 billion.<\/p>\n
In return for the funds, the Indonesian government promised to
\nrestructure banks, reform its tax system, and cut tariffs and
\ntrade barriers.<\/p>\n
\"It's the expression of support that is positive and will help
\nto turn the markets from here,\" said Frank Fernandez, principal
\nportfolio manager at Global Emerging Markets Advisors.<\/p>\n
The aid package was announced at the end of a week of
\nextremely volatile trading around the world, kicked off by a 13.7
\npercent drop in Hong Kong's Hang Seng Index. That triggered a
\n554-point loss by the Dow Jones Industrial Average on Monday, and
\nrattled nearly every market from Europe to Latin America.<\/p>\n
The financial turmoil, which now focuses on Hong Kong,
\nsurfaced this summer when the currencies of Indonesia and other
\none-time tiger economies of Southeast Asia fell prey to attacks
\nby speculators.<\/p>\n
On Friday, analysts said they were especially pleased the
\nUnited States pledged its support to Indonesia, saying the
\ngesture would have a calming effect for all markets.<\/p>\n
\"The United States is making a statement that this has got to
\nstop at the source, and one of the sources is Indonesia,\" Thomas
\nTrebat, head of emerging market research at Citicorp Securities
\nsaid.<\/p>\n
Analysts said the funds were key to enabling Indonesia to
\nshore up its foreign exchange reserves, which were decimated this
\nsummer as the nation tried to defend its currency.<\/p>\n
Still, analysts were concerned the pledges might be
\ninsufficient to stem the financial crisis that has rippled
\nthrough Southeast Asia and could spread to Latin America.<\/p>\n
Luis Luis, head of emerging market analysis at Scudder,
\nStevens & Clark, said he agreed the U.S. support for Indonesia
\nwas a \"moral boost\" to emerging markets but more needed to be
\ndone to help renew broad investor confidence.<\/p>\n
\"The problem is you probably need two out of the three
\ncountries for the region to stabilize,\" Luis said, noting that
\nMalaysia and Thailand were still experiencing troubles despite
\nthe IMF's $17.2 billion aid package to Thailand.<\/p>\n
Transparent<\/p>\n
Meanwhile, U.S. Treasury Secretary Robert Rubin should be
\nmore open with the public and Congress about the role the United
\nStates will play in a loan package for Indonesia, a Congressional
\npanel chairman said on Friday.<\/p>\n
\"An open and transparent disclosure of relevant information
\nlimits uncertainty and speculation and is a stabilizing force,\"
\nRep. Jim Saxton, chairman of the Joint Economic Committee, said
\nin a statement.<\/p>\n
He called on Rubin to disclose the terms of any loan and
\nexplain how it would be repaid.<\/p>\n
An aide said Saxton did not plan to call a hearing on the loan
\npackage.<\/p>\n
The United States said Friday it was ready to provide up to $3
\nbillion as part of backup plan for an International Monetary Fund
\nloan package to help Indonesia regain its economic balance.<\/p>\n
Rubin said the funds would come from Treasury's Exchange
\nStabilization Fund.<\/p>\n
Saxton characterized Rubin's announcement as a \"turnaround\" in
\nU.S. strategy. He said the Clinton administration's strategy had
\nbeen based on the assumption that Thailand's financial crisis
\nwould not spill over into other markets.<\/p>\n
\"The reversal of administration strategy in dealing with the
\nSoutheast Asia crisis requires explanation to assure the support
\nof the public and Congress,\" Saxton said.<\/p>\n
The IMF on Friday unveiled a $23 billion financial package
\ninvolving the World Bank and Asian Development Bank to help
\nIndonesia overcome its financial system woes.<\/p>\n
Backup financing from the United States and other countries
\nwould be used to supplement resources made available by the IMF
\nand Indonesia's own reserves, and would carry conditions.<\/p>\n
It would depend upon Indonesia putting into place economic and
\nstructural policies supported by the IMF, the World Bank and the
\nAsian Development Bank, U.S. officials said.<\/p>",
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