Five group to review RI's reform program

JAKARTA (JP): The International Monetary Fund (IMF) and the Indonesian government have agreed to form five discussion groups to review the multi-billion dollar bailout package, IMF Asia Pacific director Hubert Neiss said yesterday.

Neiss said after meeting with Coordinating Minister for Economic, Financial and Industrial Affairs Ginandjar Kartasasmita that the first group would focus on monetary policy and the second group would concentrate on efforts to strengthen the banking sector.

"Both are necessary to control inflation," Neiss told journalists after an hour-long meeting with Ginandjar.

The third group will be in charge of reviewing the 1998/1999 budget and deciding how to fit necessary subsidies into a feasible budgetary framework.

The fourth group will focus on structural reforms, "which in our view are essential to pave the way for the resumption of growth in the Indonesian economy once the crisis is over," Neiss said.

The fifth group will discuss external corporate debt restructuring initiatives.

"This is a very important element in creating the necessary confidence to turn around the present crisis," Neiss added.

Neiss said he would stay in Indonesia for "as long as necessary," as the two sides attempt to negotiate an end to the standoff.

"We of course aim to conduct this discussion as efficiently as possible so that we do not have any undue delay (in disbursing aid)," Neiss said.

The IMF has withheld the second US$3 billion tranche of a US$43 billion aid package pending a review of progress in implementing reforms agreed to by the Indonesian government on Jan 15. The promised reforms include dismantling cartels and monopolies and restructuring the banking sector.

Ginandjar declined to answer reporters' questions after the meeting but later said in a statement that the Indonesian delegation to the first and second groups will be led by Sjahril Sabirin, the central bank governor.

The delegation to the third group will be led by Fuad Bawazier, the new finance minister. The fourth group delegation will be led by the Minister of Industry and Trade Mohamad (Bob) Hasan and the delegation to the fifth group will be jointly led by the new State Minister for the Empowerment of State Enterprises Tanri Abeng, and Radius Prawiro, chairman of the government team set up to tackle the problem of external corporate debt.

The IMF team will report back to the Fund's executive board in Washington, which is scheduled to discuss the delayed disbursement of the US$3.0 billion aid at a meeting next month.

The current meetings are the first full review of the reform program undertaken since the first aid payments were made. The meetings are also due to set reform targets for the next three months.

On Jan. 15 President Soeharto signed up to a 50-point program of economic reforms in return for a US$43 bail-out package brokered by the IMF. He later criticized the reforms for failing to arrest the fall in value of the rupiah.

The rupiah was trading at about 10,200 to the dollar yesterday afternoon, down more than 70 percent from its level in July when the currency crisis started to bite.

Reports from Japan quoted Vice President B.J. Habibie as having told a visiting Japanese official last weekend that it would be difficult for Indonesia to implement two of the 50 reforms and that it needed to renegotiate a further eight points in the Jan 15. agreement.

The reports cited liberalizing the trade and distribution of cloves, used mostly for local cigarettes, and several basic food items as the two main sticking points.

The IMF standoff with Indonesia has sparked a flurry of international efforts to bring about reconciliation between the two parties in recent weeks.

Japanese Prime Minister Ryutaro Hashimoto made a trip to Jakarta last weekend for talks with Soeharto and has since contacted leaders in Australia, Britain, Singapore, South Korea, and the United States to enlist their help in assisting Indonesia overcome its economic crisis.

U.S. Treasury official David Lipton was also in town yesterday and discussed the economic crisis at a meeting with Minister of Finance Fuad Bawazier.

Lipton, declined to disclose the content of the meeting or the purpose of his mission, only saying: "We were having discussions, and we will continue to have further discussions."

Fuad told journalists yesterday that Indonesia's crisis and the weakening rupiah were on the meeting's agenda.

Fuad also met with German and Japanese officials yesterday.

"They all support us and understand the real problems Indonesia is facing. They are ready to contribute, in real actions, to help solve the crisis," Fuad said.

Fuad said countries which had committed financial aid to Indonesia through the IMF were currently waiting for the results of negotiations between Indonesian officials and the IMF team.

Fuad acknowledged that there were still a number of issues pertaining to the reform package which needed further clarification, including measures to deal with corporate debt, stabilizing the rupiah and reducing inflation.

"All these things are related to the IMF. Donor countries which made financial commitments through the IMF are awaiting the results of our negotiations with the IMF team," he said.

Fuad said that following negotiations with IMF, the government would open talks with other creditors like the World Bank and Asian Development Bank which have also committed aid to Indonesia.

"All negotiations will have the same nuance, that is how to solve our crisis. Because if our problem is not solved, it could affect other crisis-ridden Asian countries and eventually affect European countries and the United States," Fuad said.

Fuad also said the government was now working on efforts to bolster the rupiah and reduce inflation simultaneously.

"We are in the process of formulating a policy which will stabilize the rupiah exchange rate. We cannot wait until price of basic commodities rises again," Fuad said.

However, Fuad declined to confirm if this would mean fixing the exchange rate using a currency board, a move which has been strongly opposed by the IMF and major donor countries. (rid)