House, IMF in accord on economic reform program

House, IMF in accord on economic reform program

JAKARTA (JP): The House of Representatives agreed on Saturday
with the International Monetary Fund that the full implementation
of the fund-sponsored economic reform program was crucial to
revive confidence in the economy and to reach a sustainable
economic recovery.

"We had a productive discussion ... we reached a broad
agreement with the legislature about what needs to be done to
transform the current recovery (process) into a sustainable one,"
visiting IMF Asia Pacific director Yusuke Horiguchi said during a
media conference after closed-door talks with the legislators.

"Basically, a way to raise market confidence is to implement
good policies that we have agreed to," Horiguchi added.

He said these policies covered macroeconomics, including
prudent fiscal policy, fiscal decentralization and the reduction
of the debt ratio to gross domestic product, the disposal of
assets under the Indonesian Bank Restructuring Agency (IBRA) and
the bank restructuring program.

"If these policies are fully implemented, market confidence
will be enhanced," he said.

The head of House Commission IX for state budget and finance,
Benny Pasaribu, agreed with Horiguchi. "Good policies and good
implementation are very important."

"Economic recovery should be the priority," he added.

The IMF is providing a multibillion dollar bailout package to
help finance the country's economic reform program.

But numerous factors, including political interference from
the legislature, has led to the implementation of the IMF program
being delayed several times. These delays have damaged investor
confidence in the economy.

One such example was the recent postponement of the sale of
publicly listed Bank Central Asia (BCA), the country's largest
private bank which was nationalized in 1998. The delay, which was
made based on the recommendation of the House, disappointed the
IMF because the disposal of the bank is part of the key bank
restructuring program.

The dialogue with the House, the first such meeting involving
such a large number of legislators, including members of
Commission IX, was aimed at reaching a common understanding about
the fund's program in the country.

The dialogue began on Friday and lasted for seven hours, and
was continued for another two hours on Saturday.

House Speaker Akbar Tandjung participated in the first day of
discussions, while participants from the IMF included deputy
director for Asia Pacific Anoop Singh and IMF Jakarta
representative John Dodsworth.

In his speech at the opening of the meeting, Akbar explained
the reasons behind the delay in the divestment of BCA shares.

Before this meeting, the IMF only met with a handful of top
legislators during reviews of the fund-sponsored economic
program.

The IMF held monthly reviews of the economic program up
through September, after which the reviews were placed on a
quarterly basis. The IMF will disburse its funds only after it
completes the review and approves the government's upcoming
economic program.

Asked if the House wanted a greater role in deciding the
economic programs, Benny said: "It is important for the IMF to
also talk to the legislature.

"Our Constitution and state guidelines stipulate that any
agreement made by the government with a foreign institution
should have the legislature's approval."

Benny also said the House would continue to criticize the
government's economic programs if they lacked transparency, and
if the government failed to implement what had been agreed to
with the legislature.

"The current economic crisis is also due to the rubber-stamp
legislatures in the past. We don't want history to repeat
itself, so we'll continue to criticize," added fellow legislator
Ekky Sjachruddin.

Legislator Theo Toemioen said he told the IMF during the
meeting that its program had failed to stabilize the rupiah.

He said that in order to strengthen and stabilize the local
unit there had to be some form of controls implemented, including
banning the offshore trade of the rupiah.

The rupiah is currently at Rp 9,065 per U.S. dollar, its
lowest level since July. The currency has been under strong
pressure due to a combination of domestic political concerns and
external influences, particularly the weakening of the Philippine
peso. (rei)