Fri, 09 Aug 2002

Govt must reduce dependency on donors

Ahmad Junaidi and Fitri Wulandari, The Jakarta Post, Jakarta

The People's Consultative Assembly (MPR) Commission B asserted on Thursday that it was not seeking to terminate Indonesia's relationship with the International Monetary Fund (IMF), but for the government to improve its bargaining position in dealing with donor agencies.

Commission members also clarified earlier reports that the Assembly had plans to recommend that Indonesia end the relationship. Several factions, however, had asked that termination of the contract with the IMF be specifically put in the draft economic recovery decree being deliberated by Commission B.

"We are a member (of the IMF), therefore, we can't quit our membership. We have the right to benefit from the IMF's assistance," commission member Faisal Baasir told reporters on the sidelines of a plenary session on Thursday.

Faisal said the commission underlined the need for Indonesia to improve its bargaining position with regard to donor agencies, including the IMF.

Initially, Indonesia's loan contract was due to expire this year but the government decided late last year to extend the contract until 2003.

Syamsul Balda, another member of Commission B from the Reform faction, said it would push for a termination of the contract with the IMF when it expired.

"We don't want to extend the contract with the IMF because it has not brought improvements to our economy," he said, adding that Indonesia must reduce its dependency on the IMF.

The termination of the IMF contract has become a hot issue at the Assembly's Annual Session. State Minister for National Development Planning Kwik Kian Gie has been among those favoring the contract's termination.

Many legislators have given support to the proposal, saying the IMF prescription to improve the economy was not working.

The draft economic recovery decree is being debated at the Commission B plenary session. On Wednesday, the six-member drafting team discussed a recommendation for the government to review relations with donor agencies, with options ranging from correcting imbalanced positions to cutting ties with the IMF.

However, in the final draft, the team decided to only recommend a review of government policy on donor agencies to improve its bargaining position. The final draft does not mention the names of the donor agencies.

"We don't want to strain our relationship with the IMF," Faisal said.

Indonesia joined the IMF in 1967. However, it was not until the economic crisis in 1997 that Indonesia decided to ask for IMF assistance.

The government of President Soeharto signed the first Letter of Intent along with the Memorandum of Economic and Financial Policies (MEFP), which consisted of 48 programs, on Oct.31, 1997.

Initially, President Soeharto was reluctant to ask for IMF assistance for fear it would negatively affect his children's and cronies' businesses. However, as the economy continued deteriorating and the rupiah rate soaring up to around Rp 16,000 per U.S. dollar in January 1998 from Rp 2,500 in mid 1997, Soeharto gave in and signed the agreement.

Indonesia has since signed five LOIs. The IMF website says that as of June this year the government has secured US$1.9 billion of $3.6 billion in approved loan.