RI cannot be permitted to collapse<\/p>\n
The Straits Times, Asia News Network, Singapore<\/p>\n
Last week, Indonesia received a fresh credit line of US$3.14
\nbillion (S$5.75 billion) from international lending agencies and
\ngovernments, which collectively form the Consultative Group on
\nIndonesia (CGI), to tide it over its budget shortfall for the
\nnext year.<\/p>\n
The Asian Development Bank and others pledged US$1.15 billion,
\nthe World Bank US$1 billion, and Japan US$720 million.<\/p>\n
All in all, the CGI has lent Indonesia US$14 billion since
\n1998. The International Monetary Fund, which is not a member of
\nthe CGI, has a separate three-year US$5-billion deal with
\nJakarta.<\/p>\n
Rather heartening, the sight of international moneybags
\nrushing to the aid of a stricken giant which is taking a while to
\nrecover from the 1997 shock.<\/p>\n
But this is not altruism. Indonesia just cannot be permitted
\nto collapse in a heap, because the rubble and the \"bad air\" would
\nruin the neighborhood and international linkages further afield.<\/p>\n
Just as Mexico, Brazil and Russia were steered clear of
\nruinous defaults in the last two decades, Indonesia has to be
\nsteadied not only as a self-paying proposition but, most
\ncritically, also as a going concern politically.<\/p>\n
It therefore gets a little disconcerting looking at the record
\nof loan disbursements.<\/p>\n
As these are tied to fulfillment of projects and reforms, this
\nsays that Indonesia has not met specific requirements of
\ngovernance in privatization and graft fighting, to give two
\nexamples.<\/p>\n
No matter how much aid is offered, Indonesia lacks the
\ncapacity to absorb all of it.<\/p>\n
In a damning self-indictment, Kwik Kian Gie, who oversees
\nnational development and planning, told the CGI meeting he could
\nnot guarantee that some of the new aid might not be siphoned off
\nby corrupt officials.<\/p>\n
Last year's Tokyo round of the CGI pledged US$4.8 billion, but
\nonly US$2.6 billion was drawn on. In a perverse way, release of
\nfunds to a country most in need has by necessity to meet tough
\nprudential conditions.<\/p>\n
The World Bank's discussion document for the meeting showed
\nhow forbidding Indonesia's agenda is: It said uncertainties
\narising from the Sept. 11 attacks would exacerbate Jakarta's
\ndebt, endemic corruption, civil unrest and capital flight.<\/p>\n
It took a gamble judging President Megawati Soekarnoputri's
\nfirst 100 days in office as having brought \"little progress in
\nstructural and governance reforms\", and said the country was
\n\"muddling through\" a crisis.<\/p>\n
Jemal-ud-din Kassum, the bank's vice-president for East Asia
\nand Pacific, waded in with the scathing remark that investor
\nconfidence weakened in the first half of the year.<\/p>\n
Given the bleak backdrop, it is an open question whether
\nIndonesia could meet the World Bank's notional deadline of six
\nmonths to prove it can take tough decisions in exchange for the
\nloan guarantees.<\/p>\n
The CGI and international investors are using as a test the
\ngovernment's handling of an asset grab by the West Sumatra
\nlegislature.<\/p>\n
A local subsidiary of the state-owned Semen Gresik cement
\ncompany was taken over in defiance of the central government,
\nwhich meant to sell its controlling stake to a Mexican firm.<\/p>\n
This tussle is supposed to prove two things: Whether the
\ncenter can control the provinces despite the democratic
\nconcession of devolving authority, and how serious Jakarta is
\nabout privatising moribund state enterprises.<\/p>\n
Coordinating Minister for Economics Dorodjatun Kuntjoro-Jakti
\nsays this is \"illustrative\" of the difficulties the government
\nfaces.<\/p>\n
The Semen Gresik case is one small corner of the vast
\npastiche, but the government should be mindful of scoring
\nvictories where it can. Foreigners notice these things.<\/p>",
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