Terms of support<\/p>\n
Those who have frequently attacked the International Monetary
\nFund (IMF) for the tough lending conditions it has imposed on the
\nIndonesian government should feel further outraged by the outcome
\nand messages of the 13th annual meeting of the creditor
\nconsortium, the Consultative Group on Indonesia (CGI), last week.<\/p>\n
Even though CGI creditors committed US$3.4 billion in new
\nloans and grants to Indonesia for next year -- higher than their
\npledge of $3.1 billion to the 2003 state budget -- about half of
\nthese loans depends on progress in the government's policy
\nagenda. This means more than $1 billion will not be disbursed if
\nthe government fails to meet the creditors' conditions.<\/p>\n
Isn't this intervening in Indonesia's internal affairs and
\ndictating policy measures on the Indonesian government? Yes, in a
\nway it is, but there is nothing wrong with this. There is no such
\nthing as free lunch, even in bilateral relations as that between
\nthe government and CGI creditors. After all, it is the government
\nthat asked for new loans and not the other way around. Jakarta
\ncan simply reject the loans if it finds the terms unacceptable.<\/p>\n
However, given the severe liquidity crisis the government has
\nbeen suffering since the 1997 economic crisis, the CGI's lending
\nconditions -- compared to commercial borrowings -- are too good
\nto turn down. Our fiscal situation would have been much more
\ndamaging to macroeconomic stability without additional funds from
\nthe sovereign and multilateral creditors grouped in the CGI. And
\nwithout a minimum degree of macroeconomic stability, the economy
\nwill not be able to operate normally, let alone expand robustly.<\/p>\n
Moreover, further analysis will show that the conditions the
\nCGI creditors have tied to their loan and grant pledge are not
\ndesigned to serve their own interests, but follow the policy
\nagenda as stipulated in the White Paper, which the government
\nadopted in September through a national political consensus.<\/p>\n
When it comes to lending conditions, there are many
\nsimilarities in the basic treatment of sovereign and commercial
\nborrowers. In both cases, for example, the creditors must always
\nensure that the debts are sustainable -- that is, that the loans
\nwould create new revenue-generating assets to help borrowers
\nservice and repay their debts.<\/p>\n
CGI creditors must also be held accountable for their loan and
\ngrant decisions. CGI sovereign creditors must account for foreign
\nlending to their respective governments, because it is their
\ntaxpayers that shoulder such loans; and multilateral creditors
\nsuch as the IMF, World Bank and Asian Development Bank, must
\nprovide an account to shareholders, which are also governments.<\/p>\n
It is in this context that we must view the creditors' advice
\nto maintain the momentum of reform and thus retain market
\nconfidence in the government's political willingness and ability
\nto execute structural reforms -- even after the IMF program
\ncloses this year.<\/p>\n
The issue of governance took center stage at the CGI meeting
\nbecause the Indonesian government is perceived internationally to
\nbe one of the most corrupt in the world.<\/p>\n
The creditors also paid such keen attention to legal and
\njudicial reform that the Supreme Court chief justice was, for the
\nfirst time in CGI history, required to attend and brief the
\nmeeting on the road map to judicial reform.<\/p>\n
Legal and judicial reform is highly crucial in enhancing good
\ngovernance which, in turn, is vital in ensuring legal certainty,
\ncontract enforceability, policy consistency and sound tax and
\ncustoms administration, that have long been at the top of the
\nlist of business and investment concerns.<\/p>\n
As the creditors rightly argued, the investment climate must
\nbe improved to fuel a higher rate of economic growth. But
\npolicies to improve the investment climate can be effective only
\nif they are supported by an effective, predictable, transparent
\nand equitable judiciary.<\/p>\n
True, not only does Indonesia badly need new loans, but it
\nalso needs debt forgiveness, as Indonesia's outstanding foreign
\nand domestic debts have increased steeply since the 1997 economic
\ncrisis to as large as $77 billion and Rp 600 trillion ($70
\nbillion), respectively.<\/p>\n
Still, it is a wonder as to how the government has come to
\ndeserve such goodwill and understanding from overseas creditors
\nif it is considered one of the most corrupt in the world.<\/p>\n
___________<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/terms-of-support-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }