Rizal-IMF tussle<\/p>\n
Within days after his appointment as Indonesia's new chief
\neconomics minister in late August, Rizal Ramli acted firmly to
\nproclaim his leadership of the government's new economic team.
\nThe International Monetary Fund acquiesced to Rizal's demand for
\namendments to the IMF-supervised economic reform and a new reform
\nagreement bearing his signature because the introduced changes
\nwere only superficial and the core elements of the reform package
\nremained intact.<\/p>\n
However, when Rizal, in his capacity as chairman of the
\nFinancial Sector Policy Committee, approved last Monday more than
\nUS$3.7 billion in debt workouts for four business groups -- debt
\nrestructuring is supposed to be one of the vital elements of the
\neconomic reform program -- the IMF and the World Bank balked.
\nWhat made Rizal's move seem even more controversial and suspect
\nwas that the decision on the debt deals was made only two days
\nafter he received a joint letter from the IMF and World Bank
\nchief representatives in Jakarta urging a second, independent
\nopinion on the deals before they were finally approved.<\/p>\n
Rizal's biggest error seemed to be his apparent compromise of
\ntwo fundamental principles of the reform: transparency and
\naccountability, without which the whole reform program would be
\ndoomed to failure.<\/p>\n
The debt deals threw Rizal into a tussle with the two
\nmultilateral agencies, until now still the most influential
\nopinion leaders on Indonesia for international creditors and the
\ninternational market. Most analysts also criticized the deals
\nmade with Tirtamas, Texmaco, Kiani Lestari and Banten Java
\nPersada groups for their lack of transparency and for their
\nallegedly being too much in favor of the debtors.<\/p>\n
The bone of contention of the two agencies that is fully
\nshared by most analysts is their argument that it is vital to
\nhave a level playing field for restructuring debts and a basic
\nprinciple on which all the deals are based. A second opinion,
\nthey argued, could offer a new perspective on the deals as each
\ndebt restructuring could establish an important precedent and
\nhave lasting implications for taxpayer liability and the future
\nrole of the Indonesian Bank Restructuring Agency.<\/p>\n
But what especially \"burned\" Rizal over the IMF and World Bank
\nwarning was that the joint letter, which was disclosed by Dow
\nJones, seemed to single out the deal with the Texmaco Group as an
\nexample to stress the point of their argument.<\/p>\n
Rizal accused the two agencies of being discriminatory in
\ntheir judgment, questioning their motive and asking why had they
\nkept silent over worse debt deals reached previously, such as
\nthose with the Salim Group, which had ceded only Rp 20 trillion
\nworth of assets to settle its more than Rp 52 trillion debt to
\nthe government.<\/p>\n
However, the IMF and World Bank clarified in a another joint
\nletter to Rizal on Saturday that the institutions were neither
\nendorsing nor criticizing any particular asset restructuring
\nproposal, pointing out they were not in a position to do so, nor
\nwould it be appropriate. The essence of the letter amplified the
\nremark made by IMF chief representative in Jakarta John Dodsworth
\non Friday that it is not the fund's policy to comment on
\nindividual debt workouts.<\/p>\n
Needless to say, the FSPC should act immediately to disclose
\nthe details of the debt deals, explaining all the facts that led
\nit to the conclusion that the deals would be the best alternative
\nfor the economy and the people who will bear the risks.<\/p>\n
A prolonged spat between the economic team and the IMF and the
\nWorld Bank certainly would not bode well for the nation,
\nespecially in the run-up to the annual meeting of the country's
\ncreditors grouped in the Consultative Group on Indonesia in Tokyo
\nnext week, which will make a decision on the $4.8 billion in new
\nloans asked for by the government.<\/p>\n
As we argued in this column last week, if the debt workouts
\nremain suspect, and unless they are accepted as viable by the
\nHouse of Representatives and the market (the international
\nfinancial community), they will not be effective in helping the
\ndebtors resume normal operations because new credit lines would
\nlikely remain closed to them. Only when the companies are
\nrestored to normal production will the government have a fair
\nchance of recouping the huge amount of taxpayers' money already
\ninvested in their plants.<\/p>",
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"sponsor": "Okusi Associates",
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