World Bank seeks Indonesia's action on corruption<\/p>\n
SYDNEY (Reuters): Indonesia's new president may enjoy an
\neconomic honeymoon as deals with the IMF and the Paris Club
\ncreditors fall into place, but the World Bank wants to see clear
\nsteps on issues like corruption before increasing its aid.<\/p>\n
Mark Baird, the bank's Indonesia country director, said on
\nMonday he was hopeful the new government of Megawati
\nSoekarnoputri would sign an IMF deal by end August, freeing up a
\n$400 million tranche needed to restore investor faith in the
\nailing economy.<\/p>\n
That in turn would pave the way for a \"successful\" September
\n10 meeting with the Paris Club of creditors on rescheduling
\nUS$2.8 billion in debt payments due this year, and for a
\ngathering in November of the Consultative Group for Indonesia, a
\nnumber of donors who last year pledged some $4.8 billion in
\nloans.<\/p>\n
\"That I think is a sort of schedule of events over a six month
\nperiod that hopefully will sustain the good news in the short
\nterm and in that sense extend the honeymoon period,\" Baird told
\nreporters in Sydney.<\/p>\n
\"But it will leave open the question of how committed is the
\ngovernment to the more fundamental reforms.\"<\/p>\n
Baird also tried to discourage any notion of further debt
\nrelief beyond what was already on the table with the Paris Club.
\nAdditional debt relief was neither needed nor desirable, he said.<\/p>\n
The appointment of Megawati ended months of political chaos
\nand brinkmanship as her predecessor Abdurrahman Wahid fought off
\nlawmakers trying to oust him over his erratic 21-month rule.<\/p>\n
The naming of her economic cabinet last week, which contained
\na good balance of private sector professionals and economists,
\nfurther boosted confidence and was welcomed by the World Bank.<\/p>\n
The developments may open the door to a revival of relations
\nwith donors and lenders, like the International Monetary Fund,
\nwhich had soured as Jakarta's economic reform process stalled.<\/p>\n
The IMF signed a draft letter of intent over the $400 million
\nwith Jakarta in July, subject to approval in Washington.<\/p>\n
The Paris Club agreement is dependent on the IMF deal.<\/p>\n
And the World Bank, which agreed to $422 million in new loans
\nin June after slashing its aid from $1.2 billion in January, says
\nit may restore the higher levels if the IMF funds come through.<\/p>\n
But Baird said the bank needed to see two concrete steps
\nbefore increasing its commitment in Indonesia.<\/p>\n
The first was on \"fiduciary control\" -- the management of
\nprocurement and government audits. That may involve the setting
\nup of an office of public procurement.<\/p>\n
\"This to us is very critical if we are to be satisfied and if
\nour shareholders are to be satisfied that past problems with
\ncorruption are being seriously looked at,\" Baird said.<\/p>\n
The other area was a reshaping of the government's poverty
\nreduction strategy, away from targeted subsidies and towards a
\nmore general appreciation of the impact of policies on the poor.<\/p>\n
Baird said good progress was already being made with a
\nrecognition that fuel subsidies do not help the poor.<\/p>\n
He said further debt relief, as suggested by the Australian
\nForeign Ministry last week, was not a solution.<\/p>\n
Indonesia should safeguard its access to international capital
\nmarkets, be very careful about new borrowings, tackle corruption
\nto make sure expensive loans do not go to waste and strengthen
\nits future capacity for debt servicing, he said.<\/p>\n
\"The key is not to solve Indonesia's law and order problems
\ntoday because it is not possible, or to have a bureaucracy that's
\nnot corrupt, to have a financial sector that works properly,
\nbecause that is not possible,\" he said.<\/p>\n
\"The key is to show that the government is moving in the right
\ndirection and with that I believe there will be enough
\ninternational goodwill and support to see them through the
\ntransition and into a sustainable period of recovery.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/world-bank-seeks-indonesias-action-on-corruption-1447893297",
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"sponsor": "Okusi Associates",
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