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).