Faster reforms, please

Faster reforms, please

International donors unanimously reaffirmed strong support for
Indonesia at this extremely difficult time and indicated their
intention to make additional loan and grant commitments provided
reforms are vigorously pursued.

This was the spirit of the informal meeting of the
Consultative Group on Indonesia (CGI) on Friday that assessed the
country's economic problems and outlook in the aftermath of the
horrific Oct. 12 bomb blast in Bali. The interim meeting prepared
the agenda for CGI's 12th annual conference, which was
rescheduled from late October to Jan. 21 and Jan. 22.

The World Bank-coordinated donors indicated their willingness
to ensure adequate financial support and to be flexible enough
with regards to the amount of their aid and the terms of their
loan commitments to meet the need of the state budget next year.

That means that the donors will be willing to put up larger
amounts of soft-term loans to finance the bigger deficit spending
the government plans next year to provide stimulus to the
economy. Indonesia may also get more commitments in the forms of
grants and quickly disbursing loans, instead of project aid that
requires counterpart funding from the government.

But however flexible the donors are about the terms of their
loans and however strong is their support of Indonesia, there is
one crucial requirement that appears to be nonnegotiable: strong
security measures against terrorism and accelerated
implementation of structural reforms in all sectors.

The World Bank and the Asian Development Bank, which together
usually account for more than 40 percent of CGI's total aid
commitments, emphasized at the meeting that this is now the time
for the government to show its leadership in speeding up reforms.

The International Monetary Fund, which is providing an
extended facility to help Indonesia manage its economic crisis,
urged the government to move decisively to strengthen the
execution of structural reforms to bolster market confidence and
contain the adverse impact of the Bali bomb attack.

Even Japan, the single largest donor of the 30-member CGI
which usually opts for sugar-coated criticism, was more
straightforward with bold advice, pointing out that at the very
moment accelerated reforms are critically needed to restore the
foundations of growth and development.

This strong advice should not be seen as an intervention into
Indonesia's internal affairs. Neither does it mean that the
government should push through reforms simply to obtain foreign
aid.

The blunt fact is that the donors would simply be wasting
their money if, for example, corruption continued to wreck the
effectiveness of government investment expenditures. Simply put,
Indonesia would never get out of its current crisis without
pushing through all the reforms in banking, corporate, public-
sector governance and judicial sectors.

Moreover, how could we be justified in asking for help from
taxpayers in other countries if we ourselves did not fully take
our share of the burden, nor were determined to go all out to
take on painful reforms to eliminate the woes that caused our
crisis in the first place?

The donors don't appear to be asking for immediate completion
of all structural reforms, which would be impossible in view of
the complex challenges the nation is facing in its transition
from authoritarian rule to democracy and from centralized
government to regional autonomy.

They realize that many of the reform measures would take
considerable time to accomplish. They nonetheless want to see the
government lay out a clear road map for reforms and maintain
policy coherence and remain on the right path of the reform
drive.

All this makes it vital for President Megawati Soekarnoputri's
administration to show strong leadership, give solid responses to
the problems and communicate these responses to the people.

Megawati should begin to realize that, different from the era
of Soeharto's authoritarian rule, governing Indonesia now is
about building coalitions at the House of Representatives. But
she will not be able to build coalitions if she cannot maintain
high discipline within her own party (the Indonesia Democratic
Party of Struggle, PDI Perjuangan), the largest faction at the
House.

Only with highly disciplined parties will Megawati and her
Vice President Hamzah Haz, leader of the United Development Party
(PPP), which is the third largest faction at the House, be able
to reach the necessary compromises with other factions in order
to build the coalitions needed to obtain national consensus for
reform measures and to advance reform legislation through the
House.