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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