East Timor violence puts IMF bailout at risk

East Timor violence puts IMF bailout at risk

CANBERRA (Agencies): The Australian government Tuesday
reiterated that withdrawing its support for a US$43 billion
International Monetary Fund-led bailout for Indonesia is a last-
resort option if Jakarta refuses to allow an international
peacekeeping force in East Timor.

Australia agreed to contribute up to $1 billion in the form of
a short-term loan to the IMF-led bailout of Indonesia.

The amount of the loan that hasn't been drawn down could be
withdrawn "as a last resort if Indonesia isn't prepared to allow
some sort of international presence on the ground, Foreign
Minister Alexander Downer was quoted by Dow Jones Newswires as
saying.

In an earlier briefing, high-level government sources said
Canberra doesn't have any interest in humbling the Indonesian
economy by withdrawing the funding.

Monday, the government said the IMF could withhold funds under
the bailout program if Indonesia fails to maintain law and order
in East Timor.

In Tokyo, Prime Minister Keizo Obuchi said Tuesday that the
Japanese government will take a careful but positive stance to
international efforts aimed at restoring peace in East Timor.

But Tokyo will not halt aid to Indonesia worth hundreds of
millions of dollars, officials said.

"Our country needs to respond carefully but positively to the
situation," Obuchi was quoted by Jiji Press as telling Japanese
reporters in Tokyo.

"Actions by the Indonesian government and the United Nations
are needed," Obuchi said. "I hope that public peace will be
maintained and that governance will be restored as soon as
possible."

Indonesia Tuesday imposed martial law on East Timor following
the collapse of law and order after the troubled territory voted
overwhelmingly for independence.

Japan is the largest aid donor to Indonesia but will not halt
that aid, foreign ministry spokesman Sadaaki Numata said.

"Indonesia itself is in the process of very important
transition," Numata told a news conference.

"It will need to achieve that transition. For that help from
the international community is necessary."

In 1998, Japan gave US$828.47 million in aid to Indonesia.
Of that figure, $589.88 million took the form of low-interest
government loans with the remaining $238.59 million grant-in-aid
and technological assistance.

Chief Cabinet Secretary Hiromu Nonaka said Tokyo would urge
the Indonesian government to restore peace in Timor.

"It is extremely regrettable that the situation has not
improved and that tensions have still mounted," Nonaka told a
news conference.

Meanwhile British Foreign Secretary Robin Cook said on Tuesday
that suspending financial aid to Indonesia would not help solve
the crisis in East Timor.

Cook told a news conference in Tokyo that he did not believe
that freezing aid to Jakarta would put pressure on the Indonesian
military, which he said has proved unable to restore peace in the
violence-torn territory.

"I question whether suspending aid to Indonesia will add
pressure to the military, where it is most needed," he said.

Cook said he hoped the Indonesian government would reach an
agreement with the United Nations in bringing in international
peacekeepers to restore peace in East Timor.

"I hope we can reach an agreement...It would not help make the
task easier if we speculate further of a failure," he said.

In other development, Australian dock workers on Tuesday
banned work on Indonesian cargo ships at Australian ports because
of violence in the bloodied territory of East Timor.

Maritime Union of Australia acting national secretary Paddy
Crumlin said the union had stopped unloading all cargo and ships
from Indonesia because of the Indonesian government's role in
massacres in East Timor.

The nation-wide ban has support of Australia's umbrella union
body, the Australian Council of Trade Unions (ACTU), which would
meet on Wednesday to endorsed the bans, he said.

Indonesian bans were expected to be taken up by other
Australian unions, effectively freezing work on all commercial
activity with the country, he told Reuters.

"You're likely to see a fair widening of the sanctions," he
said. "Manufacturing, anything that's involved in some sort of
commerce with Indonesia (are expected to be involved)."

The bans would stay in place until the Indonesian government
restored law and order in East Timor and halted bloodshed in the
province, he said.

"The massacres and appalling treatment of the East Timorese
has the Indonesian government's fingerprints all over it," he
said.

"We want the human rights abuses to stop and the slaughter. We
think that sufficient pressure needs to be applied from the
international community."

Indonesia and Australia are major trading partners. Australian
imports from Indonesia in 1998 amounted to A$3.6 billion (US$2.3
billion) while Australian exports to Indonesia totaled A$2.2
billion.

Main imports are crude petroleum, jewelry and non-monetary
gold. Main exports are cotton, crude petroleum and grains.
A spokesman for the Department of Foreign Affairs and Trade
(DFAT) declined comment on the bans, apart from saying that the
Australian government was not immediately focussing on the aspect
of union activity in relation to Timor unrest.