Government, IMF to review new autonomy policy

Government, IMF to review new autonomy policy

JAKARTA (JP): The Coordinating Minister for the Economy Rizal
Ramli said on Monday that the government would continue to
discuss with the International Monetary Fund (IMF) ways to
improve the implementation of the new regional autonomy law.

Rizal said that the review was needed due to unanticipated
problems and the dynamics of the economy.

"We'll see. If it is positive (the input from the IMF), we'll
listen and we'll improve it. That's our principle," he told
reporters on the sidelines of a closed-door meeting with the
House of Representatives over the amendment of the central bank
law.

Rizal did not say what aspects would be discussed with the IMF
and when it would be completed.

The government launched the new autonomy policy early this
year under which provinces and regencies will have greater power
in managing their social and economic affairs including fiscal
policy.

The IMF has expressed concerns over the hastily prepared new
autonomy law, particularly about the prospect that the newly
empowered regions would embark on a borrowing binge to finance
their greater administrative roles. If this were to happen, it
could jeopardize the recovery process of the overall economy. The
Fund has demanded that the government issues a regulation to
prohibit the regions from borrowing.

The IMF, which is providing a multibillion dollar bailout fund
for the country, is currently in the process of reviewing the
government economic reform program. If the Fund approves the
economic program, it will disburse its next loan tranche.

The IMF was supposed to disburse another US$400 million loan
last year but it was delayed until February or March of this
year.

But Rizal dismissed suggestion that the government had
surrendered to pressure from the IMF.

"This is because we have goodwill," he said.

He said that there had been no specific agreement earlier
between the government and the IMF over how to implement the new
autonomy and fiscal decentralization policy.

Rizal also said that neither the IMF nor the government had
fully anticipated the problems that might occur in the
implementation of the regional autonomy law.

He said that one of the problems was the transfer of around
1.9 million government employees from the payroll of the central
government to the payrolls of the local administrations.

"It was not anticipated that there would be around 1.9 million
government employees to be transferred," he said.

Finance ministry officials have said that the central
government had so far only managed to transfer around 900,000
government employees.

Meanwhile, Rizal said that the government had managed to
complete nearly all of the key economic reform program targets
set by the IMF.

He pointed out that the Indonesian Bank Restructuring Agency
(IBRA) had managed to raise more than its Rp 19.9 trillion cash
target, and the Jakarta Initiative Task Force (JITF) had managed
to help restructure between US$8-10 billion in corporate overseas
debt in the 2000 fiscal year ending in December.

"Regarding the budget deficit, the government has been more
conservative," he said, pointing out that the deficit in 2000 was
only around 3.5 percent of gross domestic product compared to
initial projection of 4.8 percent of GDP.

One key economic program failed to be completed by the
government last year was the sale of the government's majority
stakes in the publicly-listed Bank Central Asia (BCA) and Bank
Niaga.

The IMF has expressed disappointment over the delay in the
sale of the two banks. The government now plans to sell the banks
sometime in June this year. (rei)