Central government to guarantee provinces' debts

JAKARTA (JP): Coordinating Minister for the Economy Rizal Ramli said on Friday the central government would guarantee foreign debts incurred by provincial administrations after the autonomy law takes effect next year.

Rizal said a guarantee from the central government was necessary to ease the concerns of foreign creditors about the regions' ability to repay their debts.

He said foreign creditors attending the recent meeting of the Consultative Group on Indonesia (CGI) in Japan, had raised concerns over the ability of provincial administrations to repay their foreign debts.

Rizal said the central government would be extra careful in assessing the capability of a province in borrowing foreign funds.

"Regions' foreign debts must not pass us unchecked," Rizal said during a business luncheon hosted by the German-Indonesian Business Association.

Visiting German Minister of Foreign Affairs Joschka Fischer also attended the luncheon.

Rizal said the central government must avoid the mistakes of other countries, which delegated provinces the authority to oversee their own debts.

According to him, Brazil ran into problems during the 1980s after its local administrations borrowed foreign funds without proper supervision.

"The situation got out of control, and in the end it was the central government that took over the debts," he said.

The government also gave its assurance last month that the implementation of regional autonomy would not affect the repayment of existing foreign debts.

Rizal also hinted the government might delay the implementation of autonomy for the forestry and mining sectors.

He said these two sectors could be prone to problems when the central government shifts its authority to the regions.

"After review, we decided to slow down the process," he said without elaborating.

The government planned to implement full autonomy by Jan. 1, 2001.

Under the autonomy law, provinces, regencies and mayoralties will receive greater authority to handle their own affairs.

The director general for general mining at the Ministry of Energy and Mineral Resources, Surna Tjahja Djadjadiningrat, was unable to confirm a delay of autonomy in the mining sector.

"I know that it will be discussed at a Cabinet meeting," he told The Jakarta Post.

Surna was referring to a proposed five-year delay for the implementation of autonomy in regard to the mining contracts of foreign investors.

He said earlier he proposed the delay because foreign investors were concerned over the legal strength of contracts signed by local administrations.(bkm)