Australia warns IMF not to lead RI deeper into crisis
Australia warns IMF not to lead RI deeper into crisis
SYDNEY (AFP): Australia stepped up efforts yesterday to broker a reconciliation between Indonesia and the International Monetary Fund (IMF) by warning the IMF to avoid plunging Indonesia into deeper crisis.
On the eve of a trip to Washington for talks with IMF and U.S. officials, Australian Foreign Minister Alexander Downer said the IMF must take into account the social environment of Indonesia in implementing its rescue package.
"There is no point in imposing reforms on Indonesia in such a way that they tear apart the social fabric of the country because if that happens the reforms will end up by never taking place," he told reporters here.
"Not only will Indonesia be a loser out of that but so will the international community, in particular those countries which are close to Indonesia in a geographical sense."
Australia, which has also contributed to the two other IMF aid packages for Thailand and South Korea, has withheld a $1.0 billion loan promised to Indonesia as part of the IMF package until it complies with IMF conditions.
Downer leaves with an Australian delegation Wednesday for the United States where he will also meet U.S. Secretary of State Madeline Albright and the President of the World Bank James Wolfensohn.
Downer emphasized yesterday that Canberra's key objective remained one of trying to ensure an agreement is reached on the continuation of IMF support for Indonesia.
Asked if Soeharto's new cabinet would make Australia's objective more difficult to achieve, he declined to comment on the personalities, but said the cabinet had a major task ahead of it.
"It has the task of implementing reform and it needs to generate international confidence in its commitment to economic reform. It is not going to be an easy thing to do."
He said Australia, as a contributor to the IMF package and a neighbor of Indonesia, supported the reform package.
"What we want to see is the implementation of the reform program particularly in the financial and banking areas, but also more broadly across the operation of the Indonesian economy so it becomes an economy which is more competitive and also more transparent.
In Manila, Robert Dunn, professor of economics of the George Washington University, said IMF must "play it tough" with Indonesia to send a strong message to other countries that might be tempted to borrow and spend too freely,
"The IMF has got to play it tough with Indonesia. If it softens, other countries will get the word," and engage in careless borrowing and spending, Dunn said at a conference organized by the Manila-based University of Asia and the Pacific.
The IMF has withheld a US$3 billion installment of its $40 billion bailout package from Indonesia because of President Soeharto's refusal to implement IMF reforms.
IMF officials are reportedly in Jakarta this week for talks on aid aimed at stabilizing the currency, reforms aimed at breaking up monopolies held by Soeharto intimates and making the economy more transparent.
The fund should tell Indonesia to "do what you are supposed to do or there is no money", Dunn said, but also stressed that Indonesia's troubles were more of a "political problem".
He said that other countries hit by the crisis, such as Malaysia and Thailand, had "turned the corner", and added that "Korea is not as far along ... but the direction there is encouraging."
"I don't think we can talk any longer of Asian debt crisis," he said, noting the improvement of these other countries.
"But then you have this one that is bad news," he said, referring to Indonesia's continued stand-off with the IMF over its refusal to implement key reforms which would hurt the interests of the family and close friends of newly-reappointed President Soeharto.