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.