Further reforms needed to ensure certainty

Further reforms needed to ensure certainty

JAKARTA (JP): Economists and businesspeople hailed yesterday
the government's decision to slash spending and delay major
projects in a bid to convince foreign investors about its
seriousness in dealing with currency and stock market upheavals.

But they said the government should continue to send other
positive signals to the market by further reforms and actions to
regain investors confidence in Indonesia.

Minister of Finance Mar'ie Muhammad announced Tuesday a cut in
budget spending on development programs amounting to Rp 3.28
trillion (US$1.1 billion), or 8.4 percent of its development
budget for the current 1997/1998 fiscal year.

State-related projects worth Rp 39 trillion (US$13.22 billion)
would be postponed and other similar projects worth Rp 63
trillion would be reviewed, Mar'ie said.

But interested parties are still waiting on further details of
the proposed cuts to assess the impact on earnings this year and
the next.

For instance, details of participants in some of the projects
were lacking.

"The government is moving in the right direction. But the
devil remains on details and implementations," said Raden
Pardede, an economist at state-owned Danareksa Securities.

He said the whole Southeast Asian region was overshadowed by
China's reform program announced at the close of the ruling
Communist Party's 15th congress last week.

"It means we have to do more than China to attract foreign
investment," he said.

Former cabinet minister and economist Moh. Sadli said public
and private businesses should not blame the government for the
current currency and stock market crises but instead help with
their own retrenchment program.

"We should not let the government fight alone. We must help
the government by reviewing our consumption pattern and our
business expansion program. It is time to eye our investment
plan," Sadli said.

He said the retrenchment of major projects would slow down
economic growth to about 5 percent this year and the next, but it
was the most effective way of containing the current account
deficit and avoiding a "crash landing" from the current crises.

The International Monetary Fund (IMF) also applauded the
government's action to cut budget spending and delay major
projects.

IMF's first deputy managing director Stanley Fischer described
the move as "a very good example of the way Indonesia has taken
positive action to deal with the crisis".

Industries hardest hit by the cutback measures include mines
and energy, public works and transportation.

Among projects postponed were two oil refineries and 14
electricity generation projects.

Power projects

Nine more power projects would be reviewed while 29 toll road
projects were postponed, along with the $176 million Surabaya-
Madura bridge in East Java and 14 power generation projects.

Director of electricity and energy development at the Ministry
of Mines and Energy, Endro Utomo Notodisuryo, said the decision
would give a chance for state-owned electricity company PLN to
renegotiate power purchase agreements with private power firms to
reach a "fairer" value.

A power purchase agreement could be considered fair if private
power companies and PLN equally shared the risk of loss, he said.

"The current power purchase agreement put most of the risk of
loss on PLN," he said.

Endro said he was not afraid the postponement of power
projects would result in a lack of power supply in the future
because power growth demand would also decline following the
postponement of other giant projects.

Finance director of publicly listed toll road developer PT
Citra Marga Nusaphala Persada, Tito Sulistio, also welcomed the
government's move to reschedule some mega projects, including
toll roads.

The company would continue to develop the Waru-Tanjung Perak
toll road project in Surabaya, East Java, as it had secured the
financing for the project, he said.

The Waru-Tanjung Perak toll road project is included in the
list of projects to be reviewed. This means the projects can go
ahead as long as the investor has the finances.

Tito argued that his company had raised Rp 500 billion from
the rights shares issuance earlier this month. (jsk/aly/rid)

Retrenchment -- Page 12