Donors pledge $4.7 billion in loans

Donors pledge $4.7 billion in loans

JAKARTA (JP): The country's major donors in the Consultative
Group on Indonesia (CGI) demonstrated their full support for
President Abdurrahman Wahid's administration on Wednesday by
pledging some US$4.7 billion in loans, including an unprecedented
amount of grants.

The World Bank said in a statement that the new loans would
help the democratically elected government tackle the country's
various tough challenges, which include banking and corporate
restructuring, social justice and rampant corruption.

"There have been many expressions of support from donors,"
said World Bank vice president for East Asia Jean-Michel Severino
at a news conference following the two-day CGI ninth annual
meeting, which was held for the first time in Jakarta.

Severino said the donors had been impressed by the
government's commitment to fight corruption, create good
corporate governance, protect the environment and to press ahead
with painful economic reform programs.

The World Bank chaired the donors meeting.

Indonesia earlier said it needed between $4.2 billion and $4.7
billion in loans to help finance the April-December 2000 state
budget deficit, which is estimated to be 5 percent of the gross
domestic product.

The lending from the CGI was made ahead of the International
Monetary Fund's board meeting, scheduled for Friday, which is set
to decide on whether to approve Indonesia's economic programs as
described in the new letter of intent (LoI).

If the IMF approves the LoI -- as many expect -- the Fund will
immediately release part of $5 billion of bail out money, which
is to be disbursed over the next three years.

The government welcomed the loan commitment and the
international support.

"We stand at a crossroads in the history of Indonesia. We are
determined to create a society that is just and which delivers
broad-based economic growth to our people," said Coordinating
Minister for the Economy, Finance and Industry Kwik Kian Gie.

"What we now have achieved is macroeconomic stability -- but
that is not enough. Our government has an ambitious agenda that
we cannot accomplish alone. But we can begin to move in the right
direction -- with the help of all involved -- and look forward to
creating a country where the people believe anything is
possible."

Kwik said that some $520 million of the total loan commitments
were in the form of grants that do not have to be repaid.

"That is a big support in the fight against corruption. This
will be financed by grants," he said.

He said the amount of grants was unprecedented and it showed
strong international support for the new administration.

Kwik also said the size of the CGI loan reflected the
government's determination to lower dependency on foreign loans.

The World Bank said Indonesia's April-December external
financing needs of $6.6 billion, which are equivalent to an
annualized $8.8 billion, were significantly lower than the $9.8
billion it required in the previous fiscal year -- proof that
Indonesia was reducing its dependence on foreign borrowing.

Kwik also acknowledged that part of the $4.7 billion loan
commitment was a carryover from last year's $5.9 billion
commitment, which was partly canceled following strained
relations between the previous government and its donors in the
wake of human rights violations in East Timor and the high-
profile Bank Bali scandal.

Kwik declined to mention the value of the "repledged loans."

The CGI represents 33 donor countries and international
lending institutions.

Japan, which has traditionally been Indonesia's largest
creditor, pledged around $1.56 billion, followed by the World
Bank with $1.5 billion and the Asian Development Bank with $1.06
billion.

The Netherlands, which resumes its CGI membership this year,
is expected to announce its loan commitment on Thursday (today).

Former president Soeharto rejected loans from the Netherlands
in 1992 following strong criticism from a visiting Dutch
minister.

Meanwhile, Tatsuo Watanabe, deputy director general of the
international bureau at Japan's finance ministry, told a separate
news conference that Japan's pledge, the highest from the CGI,
proved its commitment to extending "as much support as possible
to assist Indonesia's self-help efforts".

He also said the Japanese government was prepared to extend
its rescheduling facility for Indonesia's sovereign debt at the
upcoming meeting of the Paris Club of donors.

"We have no difficulty in dealing with the Paris Club's
rescheduling mechanism," Watanabe said. "It's normal practice in
the international financial world that countries in difficult
situations ask the international community for debt rescheduling
arrangements."

The government has said it plans to reschedule around $2.2
billion of debt in the 2000 budget year.

Watanabe, however, refused to mention the amount of debt
rescheduling that Japan would grant for Indonesia.

"At the same time, we would like to ask Indonesia to continue
its policies for structural reform and to make further efforts to
establish transparent and good governance, completely eliminating
so-called KKN," Watanabe said, referring to the local acronym for
corruption, collusion and nepotism.

Japan's $1.56 billion commitment in the CGI includes a $500
million loan program already pledged under the so-called "New
Miyazawa Initiative", and $570 million of loans in the pipeline
for ongoing Japanese projects in Indonesia.

The pledge also include $230 million of untied loans that will
be disbursed through the Japan Bank for International Cooperation
(JIBC).

Japan is also committed to extending $150 million of loans to
finance community and local government support sector development
programs. In addition, it will also give grants and technical
assistance totaling $114 million.

The CGI gathering was held against the backdrop of a
disagreement between President Abdurrahman and former Armed
Forces commander Gen. Wiranto who now sits in the Cabinet as the
coordinating minister for security and political affairs.

Abdurrahman said on Tuesday during his overseas trip that
Wiranto must resign to allow investigation into alleged human
rights violations in East Timor. But Wiranto fought back, saying
that he would not resign until the charges had been proven.

Asked if the CGI discussed the issue, Severino said, "This was
not addressed during the CGI." He declined to provide details.
(rei/rid)