Government to meet donors at CGI mid-term meeting

Government to meet donors at CGI mid-term meeting

Dadan Wijaksana, The Jakarta Post, Jakarta

The government will meet on Monday with representatives of the
country's traditional donors here at a mid-term Consultative
Group on Indonesia (CGI) meeting to discuss the progress it has
made on various economic reforms.

The one-day meeting is a prelude forum, the results of which
will provide the basis for donors to decide on a new loan
commitment when they convene at the next annual meeting in
November.

The CGI, which groups together 21 nations and 11 multilateral
lenders, such as the World Bank and the Asian Development Bank
(ADB), has been a crucial financial source for the country to
help cover the annual state budget deficit.

Additional financing comes from privatization proceeds and the
sale of assets under the Indonesian Bank Restructuring Agency
(IBRA).

This year, the donors have agreed to provide US$2.7 billion in
fresh loans to fill the budget deficit gap estimated at 1.8
percent of gross domestic products (GDP).

Discussion on the country's economic policy and investment
climate will be high on the agenda in Monday's meeting. On both
topics, the focus would be on the latest developments as well as
plans for the coming year, a press statement said.

Despite solid results in stabilizing the country's
macroeconomic indicators -- as seen in the declining Bank
Indonesia benchmark interest rate and a benign inflation driven
by a strong rupiah -- the government has been sluggish in
accelerating economic growth, attributed mainly to its failure to
lure investments.

With limited efforts in creating a better investment climate,
foreign investors have been hard to come by, depriving the
economy of its main engine of growth and subsequently resulting
in slow progress in reducing poverty.

The modest annual growth rate of 3 to 4 percent during the
past couple of years has been insufficient to absorb millions of
jobless Indonesians.

A high level of growth of at least 6 percent per annum should
be able to create more jobs, thereby lifting more people out of
poverty.

The November annual meeting, at which the CGI will assess the
financing needs for Indonesia's 2004 state budget, will be of
great importance to help instill confidence in foreign investors,
particularly as the International Monetary Fund's supervisory
role in the implementation of the government's economic reform
measures will end as of this year.

Although the IMF's role was never intended to help plug the
budget deficit directly, its presence had allowed Indonesia to
reschedule huge debts under the Paris Club forum, which bases its
economic assessment on Indonesia in line with the IMF.

Without the IMF, experts have predicted the country would lose
some $3 billion next year in its debt-rescheduling facility from
the Paris Club.