Five group to review RI's reform program

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)