IMF has outlived its purpose: Kwik

IMF has outlived its purpose: Kwik

The Jakarta Post, Jakarta

Outspoken State Minister for National Development Planning
Kwik Kian Gie questioned again the International Monetary Fund's
(IMF) presence in Indonesia, saying the fund had outlived its
purpose here.

Kwik said the IMF's purpose of providing Indonesia with funds
to serve as a second line of defense against currency speculators
had become obsolete.

"In fact, BI's (Bank Indonesia) foreign exchange reserves have
been rising," Kwik told reporters on Wednesday.

He expressed doubts that the IMF's presence was bolstering
foreign investors confidence, pointing to Indonesia's continued
poor investment climate. "So what is the IMF here for?" he asked.

Indonesia, almost exactly five years ago, decided to call in
the IMF over fear it lacked the reserves to fend off an onslaught
against the rupiah.

Kwik was among the first to call for the IMF and had said that
their reform program was "just what Indonesia needed."

Under the IMF led reforms, Indonesia moved to scrap monopolies
and allow market forces to gain greater control over the economy.
The reforms also spurred the divestment of state enterprises, a
policy that has drawn the most criticism against the IMF.

But in 1998 the drive for reforms spilled over to the
political front and led to the downfall of then president
Soeharto at the cost of political and security instability.

And while neighboring countries slowly recovered from the
economic crisis and have cut loose the IMF, Indonesia's economy
has hardly improved.

Kwik's statement on Wednesday marked the second time he
questioned the IMF, after the government signed a contract
extension last June with the Fund that will last until the end of
2003.

Analysts however said the IMF became important in pushing the
reforms program rather than in protecting the rupiah.

"I think this kind of pressure is good, otherwise the
government would hardly move on reforms," economist Chatib Basri
has said of the leverage foreign lenders like the IMF and the
World Bank had over the government.

On the macroeconomic front, though, progress has been minimal.

Bank Indonesia's quarterly report on Tuesday raised doubts
over the government 4 percent economic growth target due to
slowing consumption growth and sluggish export sales.

Economists have said Indonesia needed at least 5 percent to 6
percent growth in its economy to cut unemployment and poverty.

Indonesia's economy grew by 4.8 percent in 2000 mainly because
of domestic consumption, but slowed to 3.5 percent last year and
may not meet the targeted 4 percent this year, according to the
central bank.

The two other growth engines exports and investment remain
weak. A pick up in export sales toward the end of the year is
seen as unlikely with Indonesia's biggest export market, the U.S.
still in the doldrums.

Investments have been slow since the 1997 economic crisis amid
a weak banking system and companies burdened with debt. Meanwhile
the country's poor investment climate keeps foreign investors
away.