Govt reschedules projects worth $35.6b

Govt reschedules projects worth $35.6b

JAKARTA (JP): Minister of Finance Mar'ie Muhammad announced
yesterday the postponement or review of Rp 105 trillion (US$35.6
billion) worth of government and state-related projects as part
of the drastic measures to cope with the currency crisis.

Speaking before the House of Representatives' plenary session,
Mar'ie said the government would slash its investment spending by
Rp 3.28 trillion or 8.4 percent of its development budget for the
current 1997/1998 fiscal year.

"The 1997/1998 budget will end up with a deficit of Rp 9.2
trillion unless spendings are cut to offset the anticipated
decline in government tax revenues and an extra burden of oil
fuel subsidies caused by the weaker rupiah," Mar'ie said.

The rupiah has fallen by 23.53 percent against the U.S. dollar
since the start of the year, he said.

Mar'ie yesterday delivered a statement to the House on the
rupiah turmoil over the last two months and what measures will be
taken to address the impact of the currency crisis.

"Even though there has been a considerable negative impact
(from the currency crisis), we hope this event can be used as a
momentum to consolidate the national economy by implementing
various structural adjustments," Mar'ie said.

"These structural adjustments are needed so that all sectors
of the economy are well prepared to face economic globalization,
a development that is already underway," he added.

As part of the retrenchment program, the government also
decided to postpone Rp 38.92 trillion worth of investment
projects sponsored by state and private companies and to review
other projects worth Rp 62.69 trillion, Mar'ie said.

Mar'ie added that private mega projects like the $560-million,
558-meter Jakarta Tower, the $2-billion, 65-kilometer world's
longest bridge connecting Sumatra and the Malaysian peninsula and
a $950-million bridge linking Java and Sumatra, should be
postponed.

"Implementation of these projects can be resumed after the
economy recovers and the objective of this retrenchment program
has been achieved," Mar'ie told the plenary session.

The hardest hit areas would be the mining, energy, public
works and transportation sectors, the minister said.

He said the government postponed 14 power generation projects
valued at $5 billion -- out of 29 power projects that had been
negotiated -- and reviewed nine others worth $4.9 billion.

Besides, the government would delay two oil refineries worth
$800 million.

The government would also postpone 29 toll road projects and
review 19 others.

The $285-million integrated Manggarai Terminal in Jakarta and
the $176-million Surabaya-Madura bridge in East Java were also
rescheduled.

But Mar'ie said social welfare and poverty alleviation
programs would continue.

Foreign aid projects funded by soft loans from the
Consultative Group on Indonesia (CGI) creditor consortium would
also be carried out as planned.

Despite budget constraints, Mar'ie said the government was
committed to meeting all of its foreign debt obligations on
schedule.

"If the situation permits, the government may even amortize
its high-interest foreign debts ahead of schedule," Mar'ie said.

He called on the private sector to meet all of its foreign
debt obligations to maintain the country's credit risk among
foreign debtors.

"You can imagine if one private company, hopefully there will
none, run default on their foreign debts. It will affect the
whole country and increase our country's risk," Mar'ie told
journalists after the House session.

But the finance minister refused to comment on whether the
national car project, headed by President Soeharto's youngest son
Hutomo Mandala Putra, would be cut.

PT Timor Putra Nasional, the owner of the national car
project, is set to receive US$690 million in syndicated loans
from a consortium of state and private banks to build its
assembly plant in West Java.

Mar'ie yesterday also explained other policies aimed at
stabilizing the rupiah, reducing the current account deficit to
three percent of the gross domestic product, establishing a sound
banking sector and creating a vibrant private sector business.

To facilitate non-oil exports, the government would provide
incentives to exporters in the form of preshipment financing.

In addition, import duties on several raw materials and
intermediate products would also be slashed.

Sales taxes on consumer and luxury goods would be raised to
curb imports.

The government is now in the process of merging the seven
state banks to only two or three to improve efficiency and will
continue to encourage mergers among private banks.

"Insolvent banks that cannot be helped through merger or
acquisition will be liquidated at the least cost to depositors,"
Mar'ie said.

The government, he said, would also continue to reduce banking
interest rates by gradually further cutting the rates on Bank
Indonesia's short-term papers.

"This is important to promote the recovery of private
business," Mar'ie said.

The government would also ease rupiah liquidity but gradually
so as not to affect rupiah stability, he added. (rid)

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