IMF and govt to finalize new letter of intent

JAKARTA (JP): The International Monetary Fund (IMF) is finalizing an agreement with the Indonesian government on a new letter of intent to pave the way for the latest disbursement of the agency's bailout fund, IMF Asia Pacific director Hubert Neiss said here on Friday.

"We have practically finalized the new letter of intent," Neiss told reporters after meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita on Friday.

"The program is on track," he added.

Neiss arrived in Jakarta earlier this week to review the country's economic reform programs, designed with the help of the IMF to lift the country out of the 19-month-old economic crisis.

The programs are being financed by the IMF, which has so far disbursed some US$9 billion out of a total commitment of $11.3 billion.

The next disbursement of the funds will depend on whether the new letter of intent is approved by the IMF's board of directors, which is scheduled to convene later this month.

Ginandjar said that the new letter of intent, which would also include the concept of the people's economy and a new bill on establishing a good and clean government free of corruption, nepotism and collusion, would be broader than previous letters.

The transitional government of President B.J. Habibie has launched the people's economy program to boost the economic conditions of small-scale businesses, which were disregarded during the rule of former president Soeharto.

The policy has raised concerns, particularly among a handful of conglomerates which control much of the country's assets. They fear the program will be implemented through the forced redistribution of their assets.

The people's economy policy also threatens to impede the country's bank restructuring program. Minister of Cooperatives and Small Enterprises Adi Sasono, one of the strongest supporters of the people's economy program, reportedly asked the government to hand over the assets controlled by troubled private banks to cooperatives.

If this hand over occurs the bank restructuring program will be placed in jeopardy because the assets are to be sold to the highest bidder, with the proceeds being used to finance the program, according to analysts.

Adi, however, denied that he had made such a request.

Chairman of the National Development Planning Board Boediono admitted on Friday that discussions with Neiss partly focused on the people's economy program.

He said that Neiss was responding to international concerns about the new policy.

"But the IMF seems to understand this program," he told reporters on the sidelines of a meeting with the House of Representatives Commission VIII for state budget and finance. (rei)