CGI likely to meet RI aid demand

CGI likely to meet RI aid demand

JAKARTA (JP): Donors are most likely to meet Indonesia's
requests for aid in spite of their concern over the recent ban of
three magazines and increasing labor strikes in the country,
Coordinating Minister for Economy and Finance Saleh Afiff said.

"There is no indication that donors will link their concern
over the press bans and increasing labor strikes with their aid
for Indonesia," he told reporters last night after the first
session of a two-day meeting of the World Bank-led Consultative
Group on Indonesia (CGI) in Paris.

Yesterday's session, led by World Bank Vice President for East
Asia and the Pacific Gautam Kaji, was attended by 19 country
members and 13 institutional members.

A Kompas correspondent reported from Paris that during the
opening of the closed meeting in the World Bank office, dozens of
members of French non-governmental organizations were
demonstrating outside to demand the donors to pay attention to
the human rights situation in Indonesia.

Afiff, who led the Indonesian team for this year's CGI
meeting, said that he had explained the details of the cases of
labor strikes and media bans to representatives of the CGI
members. "The cases will not affect CGI's commitments for some
US$5 billion in aid for Indonesia as recommended by the World
Bank," he said.

Last year, CGI pledged to provide total aid of $5.11 billion
for Indonesian development programs.

An informed source told Kompas in Paris yesterday that CGI
will likely pledge over $5 billion in aid for Indonesia. A
Japanese representative said Japan's commitment will likely
increase to some $1.7 billion from $1.44 billion last year due to
the appreciation of the yen.

The World Bank, in its 240-page report entitled Indonesia:
Stability, Growth and Equity in Repelita VI, urged that the
Indonesian government maintain its prudent debt management,
intensify deregulatory reforms, continue poverty alleviation
programs, increase infrastructure development and promote
environmental protection.

Afiff, in his opening speech, said Indonesia is committed to
improving its macro-economic policies to maintain economic
stability through the control of inflation and adoption of a
balanced budget.

"We will invite all parties, including private business
sectors, to get involved in the restructuring of the economy," he
said.

Debt

Earlier, Afiff told Indonesian reporters covering the CGI
meeting in Paris on Wednesday evening that the government will
continue limiting its foreign debt.

The government has also asked the private sector to restrain
themselves from making new offshore commercial loans.

Indonesia's total foreign debt has reached $90 billion, of
which $36 billion is owed by the private sector. Out of the total
debt, 20 percent has short maturity.

"I have repeatedly warned borrowers in the country to restrain
themselves from taking new loans to help the nation's total debts
stay below the psychological barrier of $100 billion," he said.

The ignorance of the psychological barrier will negatively
impact not only Indonesia's current accounts but also borrowers
credibility in the country's financial management, he said.

"Another possible impact is that donors may be forced increase
their lending rates," he cautioned.

He noted that Indonesia's debt service ratio (DSR) now stands
at 32 percent. "But, the government's DSR is only 22 percent. It
is relatively safe for us," he added.

To keep the borrowing situation under control, the government
has set a ceiling of $6.5 billion in new offshore commercial
loans for this fiscal year.

Afiff conceded that the government does not intend to ban the
private business sector from making new foreign loans "but they
should be fully aware of the ceiling, considering that any
mismanagement in debts will consequently put their credibility at
stake."

The World Bank urged in its report that the government improve
its supervision on foreign loans, especially commercial ones.
"The effectiveness of Indonesia's foreign loan supervisory board
(PKLN) will improve efficiency in foreign debt management," the
World Bank said.

Responding to the World Bank's statement on the relatively
high stance of Indonesia's incremental capital output ratio
(ICOR), Afiff said that it was because Indonesia's long-term
development programs are emphasized on the development of
infrastructures which do not immediately show profits.

But Afiff acknowledged that the high level of ICOR is partly
due to inefficiency and misallocation of public investments.
(fhp)

Editorial -- Page 4