House says no reasons for WB, IMF to suspend aid

House says no reasons for WB, IMF to suspend aid

JAKARTA (JP): The House of Representatives sees no major
reason for the World Bank and International Monetary Fund (IMF)
to suspend aid disbursements to Indonesia.

Head of House Commission VIII for the state budget and finance
Tayo Tarmadi said on Thursday that the multilateral donors were
unlikely to realize such an extreme measure.

"Our relationship with the World Bank and the IMF is mutually
beneficial, so I expect they won't take such an extreme measure,"
he told The Jakarta Post on the sidelines of a hearing.

He added that a temporary aid suspension would not be of too
much concern because the central bank had said its foreign
exchange reserves were enough to secure the rupiah for up to a
two-month period.

The World Bank and IMF warned the government on Wednesday that
a failure to restore stability in East Timor may lead to a
suspension of financial aid to the country.

In its first statement since the East Timorese voted
overwhelmingly for independence last week, the Bank indirectly
linked the realization of a US$6.9 billion aid package pledged by
the Consultative Group for Indonesia (CGI) in July to a peaceful
resolution in the troubled territory.

The World Bank chairs the CGI, which groups Indonesia's major
donors.

"At the CGI meeting in July, the Indonesian government told
donors 'rest assured that... we are determined to implement our
part of the agreement and give our full support to the operations
of the United Nations in East Timor," the World Bank said.

The World Bank's comments follow similar words of warning from
the IMF, which said Indonesia had "every interest" in ensuring
the process in East Timor unfolds smoothly and without violence.

The fund said it would decide soon whether to go ahead with a
planned mid-September visit to Indonesia.

The IMF has organized $43 billion in a bailout package for the
country. The fund contributed $11 billion to the package, but it
had yet to disburse some $2.3 billion.

The UN organized a referendum for East Timor recently to
decide whether the territory would remain a part of Indonesia
under a status of wide-ranging autonomy or to be independent.
The referendum was offered by President B.J. Habibie last year.

But since the result of the referendum was announced last
week, violence has escalated in the territory with the
prointegration group, allegedly backed by the military, attacking
and killing proindependence supporters, looting and burning
houses and buildings. Thousands of people have fled the region.

The rupiah has been badly hit by the widespread violence in
East Timor, particularly as investors fear that international
donors will suspend aid to the country.

"I don't think we should panic over the warnings from the
World Bank and the IMF," said legislator Lily Asdjudiredja,
adding that aid suspension would only cause short-term trouble
for the country.

"I'm sure we can survive without their aid. We could always
find other sources of financing," he said.

Deputy chairman of the Indonesian Chamber of Commerce and
Industry, Iman Taufik, conceded.

He said that aid suspension would not cripple the country's
economy but might force the country to realize that it can
survive on domestic resources.

"We always think that we need foreign aid to survive. In fact,
we are a rich country and we can rely on domestic resources to
survive," he said.

Iman pointed out that as long as Indonesia maintained its
economic ties with major trading partners in the Southeast Asian
region, China and Japan, Indonesia would survive if the Western
world put economic sanctions on the country.

He said that Indonesian trade currently reaches $9 billion
with the Association of Southeast Asian Nation (ASEAN) countries,
$3 billion with China and $10.5 billion with Japan.

"I'm optimistic that Asian countries would not participate in
economic sanctions. Asian people are more tolerant," he said.

But others seem worried if the IMF and the World Bank realize
their threats.

"It's a matter of confidence," said Wibowo Ngaserin, deputy
chairman of the Federation of Private Domestic Banks (HEN).

He said that the continuing support of the two multilateral
institutions were crucial in maintaining confidence in the
economy.

"Without confidence, we'll be in deep trouble no matter how
large our forex reserves are," he said.

Anggito Abimanyu, an economist at the University of Gadjahmada
in Yogyakarta, said that it would be "doomsday" for Indonesia if
foreign aid was suspended.

"If they realize it (suspension of aid), then we could not
recover (from the economic crisis). This means doomsday for
Indonesia," he said, pointing out that an aid suspension would be
serious trouble for state budget financing. (rei/jsk/23)