Civil servants' salaries increased by 15 percent

Fri, 01 May 1998, 00:00 WIB | Source: REUTERS

JAKARTA (Agencies): Indonesia's civil servants will receive
15 percent pay increases from today, Coordinating Minister for
Economy, Finance and Industry Ginandjar Kartasasmita said
yesterday.

"We are raising civil service salaries 15 percent as of May
1," he told a small group of journalists.

He conceded that this did not match inflation which jumped
more than 25 percent in the first three months of this year.

"But it's all we can do," he added.

He also confirmed that fuel and electricity prices will rise
in May and early June.

"Indonesia will abide by its understanding with the IMF that
fuel and electricity prices will be adjusted in the month of May
and early June," he said.

He said that increasing those rates is a 'very high political
risk at present time when you have social unrest.'

But, Ginandjar said, it 'will show the market we're
determined to repair our economy and stop the bleeding through
(government) subsidies.

He recalled that Indonesia agreed with the International
Monetary Fund in January that fuel and electricity prices would
go up, but noted it was a matter of timing for the government.

He also said that all subsidies would be abolished by October
1 under a reform agreement with the IMF except for those on rice
and soybeans.

Mines and Energy Minister Kuntoro Mangkusubroto has said
domestic fuel prices will receive a cross-subsidy involving a
higher price for petrol and lower prices for diesel and kerosene
to ease the social impact of the increases.

More banks to close

Answering questions on the bank restructuring program,
Ginandjar said he expected more banks would halt operations as
part of the country's economic reform program.

"We should expect some more banks should cease operation,"
Ginandjar added.

He gave no precise time frame but said the move could take
place within a matter of weeks. He did not name the banks.

Indonesia late last year closed down 16 ailing banks. It
suspended the licenses of seven others and placed seven more
under supervision of the Indonesia Bank Restructuring Agency
(IBRA) in early April.

IBRA has another 40 of Indonesia's more than 200 banks under
its surveillance.

Ginandjar said the government had no target number for banks
to be closed or placed under supervision.

"No, we don't set up numbers, but we set up minimum capital
requirements," he said.

"We are not playing with targets, but (are) determined that
banks that cannot survive cease to operate," he added.

Indonesia has set a minimum capital requirement of 250 billion
rupiah after loan-loss provisions by the end of 1998.

Ginandjar said it was important to educate the public about
the reasons for the reforms, but added that he did not anticipate
any runs on banks when the latest moves were published.

"I think there'll be no rush if we close more because people
understand what is being done," he said.

He said banks under IBRA supervision were being carefully
scrutinized to see if there had been any illegal activities. He
said legal action might be taken against former management if
there had been any criminal acts.

The government plans to issue bonds to cover the cost of
banking reforms agreed with the International Monetary Fund in
return for a bail-out of more than $40 billion to help the ailing
economy.

"Bonds will be issued when the time is right," Ginandjar said,
adding that international advisers working with the central bank
would provide expert advice.