Businesses urge WB to help ease debt problem

JAKARTA (JP): Indonesian business leaders have urged the World Bank to take a more active role in helping the country's ailing private sector through its affiliated International Finance Corporation (IFC).

Teddy P. Rahmat, president of the diversified Astra International company, said here yesterday the World Bank, through its affiliated IFC, should do more to help ease the country's private-debt crisis.

"We expect the IFC to be more aggressive in entering into the private sector," he said following a meeting of more than 30 Indonesian business leaders with World Bank President James Wolfenhson yesterday.

Teddy explained that both the World Bank and the Indonesian government could not directly bail out the country's huge private sector overseas debts. "But the IFC can. We think they have to be more active," he said.

The business leaders said there was an indication the World Bank would help to push IFC to be more active.

"But we have to work hard on our homework," Teddy said.

He said the government's IMF-sponsored economic reforms were already on the right tract. "We only need to implement them consistently," he said.

IFC is an affiliate of the World Bank which helps private enterprises in developing nations by mobilizing domestic and foreign capital, including its own.

As of October 1997, its loan commitments to Indonesian companies totaled US$1.4 billion.

Indonesia's corporate short-term foreign debts are believed to total $66 billion, a major factor in the sharp fall of the rupiah which has lost over 75 percent of its value since July last year. Solving the debt problem is seen as a critical point to revive the country's economy from its current severe crisis.

Wolfensohn met with the Indonesian business leaders to get first-hand information about the current crisis.

The meeting, which was closed to the media, followed his morning gathering with Indonesian non-governmental organization leaders and influential public figures.

Later in the afternoon, he had lunch with key government officials, including Minister of Trade and Industry Tunky Ariwibowo, Minister of Finance Mar'ie Muhammad and Coordinating Minister for Economy and Finance Saleh Afiff.

Wolfensohn, who arrived in Jakarta Tuesday, also visited several slum areas in the capital. He is expected to leave the capital today to visit the Philippines and South Korea.

He previously visited Thailand, Singapore and Malaysia before coming to Indonesia on his regional tour.

"We expect the World Bank to echo the positive measures we've taken," said Irianto Ongko, chairman of the Ongko Group, pointing out that the World Bank could assure Indonesia's economic reforms and political system.

"The private sector expects the World Bank to believe that the country can recover from its current economic crisis in one to two years," said James T. Riady, vice chairman of the diversified Lippo Group.

He expected the crisis to bottom out within the next 12 months. "But the financial sector usually recovers eight months before the real sector," he said.

He believed the economy may rebound as soon as the end of March with foreign investors starting to reenter the country.

"The only major problem right now is regarding political uncertainty," he said.

The country will hold an election for the president and vice president in March.

Although the World Bank in principle does not intervene in private-debt situations, the business leaders hoped the international institution would play a mediator role between local debtors and foreign creditors.

"We need assistance in negotiating with lenders," said Aburizal Bakrie, head of the Indonesian Chamber of Commerce.

He said the business leaders also urged for greater efforts to reduce the rupiah's volatility through the establishment of a "currency board". He did not elaborate further.

The rupiah's volatility has been the main focus in the current economic crisis.

One of Wolfensohn's major questions in yesterday's meeting regarded the sharp drop of the rupiah last month, when other crisis-hit regional currencies like the baht seemed to have already stabilized.

The rupiah hit a historic low last month when it closed at Rp 17,000 against the U.S. dollar in the Singapore currency market due to fears of the private debt problem and political uncertainty.

The Indonesian currency gained ground yesterday to close at 8,700, gaining from the previous day's closing at 9,900. The currency was helped by reports that Singapore Prime Minister Goh Chok Tong had proposed to help Indonesia finance its imports.

Indonesia announced a freeze on servicing the country's corporate foreign corporate debt last month to allow debtors to negotiate new deals with their creditors. (08/das).