ASEM finance ministers' meeting gets underway

ASEM finance ministers' meeting gets underway

Dadan Wijaksana
The Jakarta Post
Nusa Dua, Bali

The fifth Asia-Europe Meeting (ASEM) for finance ministers
opened here on Saturday amid the current uncertainties and
challenges facing the global economy.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti stressed in his opening speech, the importance of the two-
day meeting for the development of economic and financial
corporation between the two continents to overcome those
challenges.

"Having a solid start in the first half of 2002, the global
economy turned out to be less assuring in the second half of 2002
and first half of 2003. Growth was affected by several
unfavorable factors, such as higher oil prices and the general
uncertainty associated with the Iraq crisis, volatility in the
financial markets and the outbreak of SARS in Asia," he
told the 31 participating delegations.

As a result, he went on, the economic outlook for the European
Union had been revised downward, while Japan's economy, which had
begun to recover last year, had again slowed.

The economic outlook in East Asian countries will be more
sober than initially thought, with growth expected to average 5
percent, he added.

Dorodjatun was speaking on behalf of President Megawati
Soekarnoputri, who was initially scheduled to open the meeting.
No explanation was available for the President's absence.

The meeting has put forward a number of issues to discuss,
covering topics such as sharing information on the outlook of
Asia, Europe and the world economy, the prospect of strengthening
financial corporation between the two continents and combating
the financing of terrorism and money-laundering activities.

Regarding financial corporation, while Europe is planning to
establish an integrated single financial market by 2005, Asia has
just begun to develop its regional bond market as an important
financial investment tool.

"We're hoping to learn from the European experience on how to
develop a strong and liquid bond market," Dorodjatun said.

Only recently, Asia launched the Asia Bond Fund, worth US$1
billion, to be used to buy out bonds issued by Asian countries as
part of those efforts (to strengthen the bond market), he said.

The participants will wrap up their meeting today and are
expected to formulate a ministerial declaration on the issues
discussed.

For Indonesia, however, the meeting will be of a greater
importance, as the government could use the opportunity to
strengthen its bilateral relationships with the participating
countries -- many of which are its main donors -- in light of its
scheduled graduation in December from the current program with
the International Monetary Fund (IMF).

Without the IMF, Indonesia will be forced to turn to bilateral
cooperation in order to offset its financing needs, especially to
help cover the deficit in the state budget.

Although the IMF's funds are never intended for budget
purposes as it can only be used as reserves, the absence of the
IMF would mean that Indonesia will lose its foreign debts
rescheduling scheme. The government had traditionally obtained
the rescheduling facility from the Paris Club of creditor
nations, which is willing to provide debt relief only if the
country remains under the IMF's program.

The absence of such rescheduling, which some analysts estimate
at around $3 billion, may further increase the budget deficit.
The bilateral commitments Indonesia is seeking are meant to help
plug that gap.

The Japanese government, the country's number one donor,
welcomed Indonesia's graduation from the IMF, saying that it
would send signals that the country was moving towards recovery.
However, it also urged Indonesia to maintain good synergy and
communication with the IMF after the current program ends.

"We are going to continue to support Indonesia even after it
graduates from the IMF program, but we also want the country to
maintain good communication with the IMF after the program. It's
important to maintain the very good environment between Indonesia
and the IMF; it's good for the investment climate," Japanese
finance minister Masajuro Shiokawa told reporters on the
sidelines of the meeting.

Dorodjatun believes that the country could secure deficit
financing without the IMF through bilateral pledges, especially
from Japan, the World Bank and the Asian Development Bank.

"All three have been very supportive of Indonesia, and I think
they will remain so, post-IMF program. From the three alone, I
believe it (the commitment) will make up more than 70 percent of
our annual deficit."

ASEM, which was first held in Thailand in 1996, is a biennial
informal meeting of heads of state and government of 10 Asian
countries and 16 EU member states, including the president of the
European Commission.