Hashimoto on tough mission to Indonesia

Hashimoto on tough mission to Indonesia

TOKYO (AFP): Japanese Prime Minister Ryutaro Hashimoto prepared yesterday for a tough but critical mission -- persuading Indonesian President Soeharto to bow to IMF demands for economic reform.

Hashimoto will visit Jakarta late Saturday and hold a summit meeting on Sunday with Soeharto, who began his seventh term in office this week, a foreign ministry official said.

"The visit is part of Japan's initiative to subdue the Asian economic crisis, and the summit is of course to focus on Indonesia's economic situation," the official said.

"During the talks, Prime Minister Hashimoto plans to announce Japan's continued support for Indonesia's economic reform efforts," he said.

But at the same time Hashimoto "will have to call on President Soeharto to carry out reform measures agreed with the IMF (International Monetary Fund), which is critical for the entire Asian economy," he said.

"The talks are unlikely to be harsh because Soeharto just started his fresh term, but the prime minister's job is not so easy," he said.

Soeharto has been reluctant to follow a strict reform program to drag Indonesia out of its crisis and unlock stalled payments from a US$40 billion international rescue fund.

Japanese Finance Minister Hikaru Matsunaga said the IMF and Indonesia remained at odds.

"I understand Indonesia's relationship with the IMF is not yet smoothed out," Matsunaga said.

Asked how he viewed meetings scheduled this weekend between Hashimoto and Soeharto, the finance minister said the two would exchange views on "what kind of assistance will help Indonesia to grow."

But Matsunaga said there was no plan to offer new assistance to Indonesia. "I have not heard of such a plan," he said.

During the summit, Soeharto may urge Japan to consider separate aid from international assistance, but Hashimoto is unlikely to accept as Tokyo has stated its support will be within the framework of the IMF, analysts said.

Japan has historically strong political and economic ties with Indonesia, and is one of Jakarta's main sources of funds.

Direct Japanese investment amounts to $20 billion, putting Indonesia ahead of Thailand and China as its main aid recipient in Asia, according to the Japan External Trade Organization (JETRO).

The Bank for International Settlements says loans from Japanese banks in Indonesia total $23.15 billion, and for years Indonesia has benefited most from the Official Development Assistance program (ODA) which totaled $966 million in 1996.

Indonesia is the world's largest recipient of Japanese ODA, taking a total 3.2 trillion yen ($26 billion) since 1966.

Japan also contributed five billion dollars to the IMF-led rescue package for Jakarta aimed at restoring confidence and stability to its markets and economy.

Western diplomats said Japan still has an important diplomatic card to play because it has a better chance of getting Soeharto's ear than the United States, whose "strong arm" tactics can hurt Indonesian sensitivities and provoke a counter-productive hardening of attitudes.

Japanese foreign ministry officials said Indonesia's new vice president B.J. Habibie plans to visit Japan next week to follow up the weekend summit between Hashimoto and Soeharto.

Habibie, who was sworn in as vice president in Jakarta Thursday after President Soeharto began his seventh term, is likely to arrive in Tokyo on Wednesday for a three-day visit.