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)

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