Creditors pledge $4.8b to Indonesia

Creditors pledge $4.8b to Indonesia

By Kornelius Purba

TOKYO (JP): The International Consultative Group on Indonesia
(CGI) agreed on Wednesday to provide US$4.8 billion in new loans
to Indonesia to fill part of its budget deficit in 2001 fiscal
year beginning in January.

Indonesian Coordinating Minister for the Economy Rizal Ramli
and Minister of Finance Prijadi Praptosuhardjo and World Bank
vice president for East Asia and the Pacific region Jemal-ud-din
Kassum told a joint news conference that an additional $530
million was pledged for technical assistance grants and support
for Indonesian non-governmental organizations (NGOs).

"Donors announced their pledges at the close of the two-day
meeting after reviewing the government's priorities, policy
initiatives, and strategies for implementing key economic, social
and institutional reforms central to Indonesia's recovery. In
all, donors pledged US$4.8 billion to support the government
budget," said Kassum who chaired the meeting.

Five representatives of five NGOs, including International NGO
Forum on Indonesian Development (INFID), were fully involved in
the two-day meeting.

"The details of the commitment of each CGI member will be
announced later," Kassum added.

The World Bank, Asian Development Bank and Japan usually put
up more than 85 percent of the CGI loan commitment.

Rizal expressed his satisfaction with the new loan pledges,
pointing out that the international support would help Indonesia
recover from the current economic crisis and achieve significant
economic growth next year.

"With the success of this meeting, strong support and
partnership from all of the delegates, we believe that Indonesian
economy will get stronger and stronger next year and in the years
to come," Rizal said.

"I was struck by the very open and substantive exchange of
views. This created a positive atmosphere and reinforced the
strong partnership between the government and donor community,"
Rizal noted.

In a related development, President Abdurrahman Wahid told
Indonesian reporters during a refueling stop on Wednesday
afternoon at the Hong Kong airport on his way from Malaysia to
Korea that of most importance to him was not the amount but the
spirit behind the CGI pledge.

"I am impressed by the openness and spirited exchange of views
that took place at the CGI meeting," the President added.

Rizal added, however, that the government would only draw upon
these funds if absolutely necessary because the loans would add
to already huge government debt burdens.

"Therefore we will only draw upon these funds if absolutely
necessary and only after exhausting every alternative to meet our
development needs from domestic sources," Rizal told the closing
session of the CGI conference.

The donors, however, seemed unsatisfied with the progress
achieved by the government in dealing with the economic reforms,
urging Indonesia to accelerate the pace of its reform measures.

"Donors understood the huge constraints confronting the
government and the difficulty of tackling such deep-rooted
problems. At the same time, the international community wanted to
accelerate momentum, especially in key areas such as legal and
judicial reforms, decentralization, and forest management,"
Kassum pointed out.

The creditors, Kassum added, urged the Indonesian Bank
Restructuring Agency (IBRA) to adhere to a set of principles
aimed at maximizing recovery for the state, to transparency of
the process and to procedures for oversight for all large debt
cases.

"Donors also urged the government to deal with domestic
political and security issues including regional unrest in
Maluku, Aceh and West Irian (Irian Jaya)," he said.

Market sentiment

The donors warned that failure to take appropriate action
could weaken market sentiment and slow or even stall recovery.

The CGI members also stressed the critical importance of
allocating scarce government resources to the highest-priority
needs, especially for poverty reduction and environmental
sustainability.

According to Kassum, the meeting did not discuss the
possibility of debt relief for Indonesia. He indicated that the
international donors might continue providing concession loans to
Indonesia to help the government reduce its burden.

Rizal could not hide his feeling of joy and relief although he
also looked tired. Accompanied by Minister of Finance Prijadi
Praptosuhardjo, Rizal left the press conference mid-way,
apparently without informing Kassum who still entertained
questions from journalists.

"They just wanted to telephone the President about the result
of this meeting," Minister of Settlement and Regional
Infrastructure Erna Witular said about the early departure of the
two ministers.

According to Erna, President Abdurrahman Wahid wanted to get
the results of the meeting before attending the Asia-Europe
(ASEM) summit in Seoul.

Sources close to the Japanese government disclosed on
Wednesday, that Japan as the biggest single money lender to
Indonesia, succeeded in convincing the U.S. delegation not to mix
politics, especially the situation in West Timor, with economic
assistance to Indonesia.

"We should not push the new civilian government too hard. The
problems of militias and violence in other provinces must of
course be seriously handled by the government. But we must
continue providing assistance to the new government," Japanese
officials were quoted as saying.

Rizal himself had appealed to the CGI members to adopt
flexibility in the design and implementation of projects in a
decentralized administration system and to extend financial
support in the field.

"We are very encouraged with the positive reactions given to
our proposals," said Rizal.

The Indonesian delegation comprised six Cabinet members,
Attorney General Marzuki Darusman and acting Bank Indonesian
Governor Anwar Nasution.

The meeting was presided over by Kassum, and attended by
delegates from the 35 members of the group, including the
governments of Japan, U.S., Australia, the Netherlands, Germany,
Italy, Canada, the European Union, IMF, ADB and the Islamic
Development Bank (IDB).