Economists credit govt policy for higher foreign aid
JAKARTA (JP): Economists said overseas donors' decision to increase aid to Indonesia reflected international confidence in Indonesia's economy.
The head of the National Private Banks Association supervisory board, I Nyoman Moena, said Indonesia had convinced donor countries and organizations that it could manage the loans prudently.
"The use of the money will increase the capacity of the economy in the long run and allow Indonesia to pay off its debts on time," Moena said.
Moena said the fact that Indonesia had not rescheduled its debt repayment program in 20 years was influential in convincing donors to maintain the level of their aid commitments this year.
The governments and multilateral financial institutions that make up the Consultative Group on Indonesia (CGI) committed US$5.3 billion in financial aid to Indonesia for the 1997/1998 fiscal year after a two-day meeting in Tokyo which ended Thursday.
The fresh loan commitment is slightly more than the $5.26 billion pledged by Indonesia's creditor group in 1996/1997.
Nathan Associates economist Ted James was quoted by AFP as saying the increasing aid commitments to Indonesia by overseas donors was a stamp of approval for the country's sound economic policies.
"We expected the CGI to come up with about the same amount of aid as last year given Indonesia's strong economic policies and overall good policymaking," James said.
The bulk of the aid came from Japan at $1.87 billion, the World Bank at $1.5 billion, with the Asian Development Bank pledging $1.2 billion.
The CGI loans came from 18 countries and 11 multilateral lending agencies and are expected to be used largely for infrastructure, human resources and poverty alleviation programs.
The aid group was formed in 1990 to replace the Dutch-chaired Inter-Governmental Group on Indonesia which Jakarta disbanded claiming The Hague was using it to pressure Indonesia.
James said Japan's reduction in aid, down from $1.92 billion in 1996, was "not surprising" given its budget cuts, adding that it was not because of concerns over Indonesia's national car policy which Japan disputes.
Japan, along with the United States and the European Union, has complained to the World Trade Organization over Indonesia's national car program, which it says flouts international trade rules.
The so-called national car policy grants exclusive import and luxury tax breaks to PT Timor Putra Nasional, controlled by President Soeharto's youngest son Hutomo Mandala Putra, to make a national car called Timor.
The Ekonit research group's Dendy Kurniawan warned that Japan would continue to reduce its aid to Indonesia as domestic sentiment demanded the Japanese government reduce foreign assistance.
Dendy said Indonesia should reduce its dependence on foreign assistance by continuing to improve domestic capacity to finance the country's development needs.
Moena said the government should continue to repay its foreign debts with high interest rates ahead of schedule to reduce the burden of servicing debts in the future.
He said the government's prepayment of foreign high interest debts had bolstered its credibility.
As of last fiscal year, the government had repaid $2.6 billion in foreign debt ahead of schedule since the 1994/1995 fiscal year, saving the government $1.45 billion in interest payments.
The minister of finance, Mar'ie Muhammad, said yesterday that the government would repay another $1 billion this fiscal year.
But Mar'ie did not specify where the government would source the funds to be used for early debt repayment this year.
So far the government has used its budget surplus and the proceeds from selling state-owned companies. (rid)