RI deserves CGI support: IMF<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
The International Monetary Fund (IMF) promised a helping hand
\nin Indonesia's bid to secure some Rp 35.4 trillion (about US$3.7
\nbillion) in new loans from the Consultative Group on Indonesia
\n(CGI), as the Fund said it would suggest donor countries lend
\ntheir support to Indonesia.<\/p>\n
The IMF's senior resident representative in Jakarta, David C.
\nNellor said on Tuesday Indonesia deserved support from the CGI.<\/p>\n
Although not a member of the group -- which includes many
\ndonors from industrialized countries, the World Bank and the
\nAsian Development Bank (ADB) -- the IMF would present its view on
\nthe Indonesian economy before participants of the CGI meeting,
\nNellor said.<\/p>\n
\"One of the elements (in the presentation) is the 2002 budget.
\nIt requires external financing, and we will argue that it
\ndeserves that support,\" he told reporters after a meeting with
\nCoordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti.<\/p>\n
Nellor's statement came after the World Bank on Monday warned
\nof increasingly wary donor countries, annoyed by Indonesia's poor
\ntrack record in meeting reform targets.<\/p>\n
The government hopes to secure some Rp 35.4 trillion in loans
\nfrom the CGI, that would help it finance the deficit in the 2002
\nstate budget.<\/p>\n
The deficit is estimated at Rp 42.1 trillion, which represents
\nabout 2.5 percent of the country's gross domestic product (GDP).<\/p>\n
External financing from the CGI is expected to cover most of
\nthe gap, while domestic financing from privatization and asset
\nsales should cover the balance.<\/p>\n
According to Nellor, support from CGI members does exist.<\/p>\n
Earlier last month, a senior government official told local
\nnewspapers that Japan was ready to pledge some US$1.4 billion,
\nthe World Bank some US$1 billion and the ADB between US$600
\nmillion to US$1 billion.<\/p>\n
But thus far, none of the lenders confirmed the amount they
\nwould pledge during the CGI meeting.<\/p>\n
The World Bank said the amount of its commitment depended on
\nhow the government was planning to use the funds.<\/p>\n
\"Donors will be interested in hearing what the government's
\nplans are and how they propose to implement the various policies
\nthey've announced,\" Nellor explained.<\/p>\n
He was referring to, among other things, the 2002 state
\nbudget, which the World Bank previously described as sound and
\nrealistic.<\/p>\n
\"What people will be looking at is if there is a critical mass
\nof policies which will enable the economy to grow,\" Nellor said.<\/p>\n
He said meeting the donor countries would also allow the
\ngovernment to explain the challenges it faces in implementing
\nreform programs.<\/p>\n
And there is no shortage of challenges confronting the
\nrecently-installed government in its attempt to reform the
\neconomy.<\/p>\n
Privatization and asset sales targets, and the lack of action
\nso far, are weighing heavily on foreign investors' appetite for
\nIndonesian assets.<\/p>\n
Chronic problems at home, ranging from anti-Western sentiment,
\nlegal uncertainties, and political instability, have dampened
\ninterest with regard to Indonesian companies.<\/p>\n
Adding to this, is the accelerated downfall of the global
\neconomy since the Sept. 11 terror strikes in the United States.<\/p>\n
The entrance of foreign investors is vital to offset domestic
\ninvestment, which has been sharply down since the financial
\ncrisis hit the country in 1997.<\/p>\n
Investment from the private sector has become important, given
\nthe government's limited ability to stimulate economic growth.<\/p>\n
Massive debts cripple the budget's spending ability, forcing
\nthe government to rely on private investors to drive the economy.<\/p>\n
Indonesia's total debt stands at some US$137.6 billion as of
\nlast August, of which US$74 billion is government debt.<\/p>\n
Yet new loans from the CGI coupled with debt rescheduling
\nunder the Paris Club agreement are necessary to lend next year's
\nbudget some degree of stability.<\/p>\n
For this year's budget, the significance of today's CGI
\nmeeting is to build confidence, according to a former IMF senior
\nofficial.<\/p>\n
Chairman of Deutsche Bank Asia, and former IMF Asia Pacific
\nDeputy Director, Hubert Neiss said foreign investors use the CGI
\nmeeting to gauge Indonesia's reform progress.<\/p>\n
\"Private foreign investors still largely take a wait and see
\nposition....they will come a bit later, now is the time for
\nofficial donors to support,\" Neiss told reporters in a press
\nconference to introduce Deutsche Bank's new chief country
\nofficer, Suresh L. Narang.<\/p>\n
A successful meeting of the CGI, he said, was bound to result
\nin a confidence boost among foreign investors.<\/p>\n
Analysts said regaining confidence was vital if the government
\nhopes to succeed with its privatization and asset sales program
\nthis year.<\/p>\n
This success rests largely on pushing ahead with the sale of
\nPT Bank Central Asia (BCA) and cement company PT Semen Gresik.<\/p>",
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