IMF insists on good governance

IMF insists on good governance

JAKARTA (JP): The International Monetary Fund's acting
managing director, Stanley Fischer, reassured Indonesia on Monday
of the IMF's strong commitment to supporting the country's
economic recovery programs, but stressed that good governance was
essential to maintaining its assistance.

Fischer said the IMF could be flexible in modifying the
programs if circumstances changed, but it had no flexibility to
compromise on the issue of good governance.

"The IMF-supported program has to insist on good governance.
This is an issue where we have no flexibility," he told Kompas
and the Jakarta Post in a brief interview following successive
meetings with President Abdurrahman Wahid and House of
Representatives Speaker Akbar Tandjung.

Fischer arrived on Sunday for a two-day visit to Jakarta to
reassure the administration of President Abdurrahman of the IMF's
support to help resolve the country's economic crisis.

There have been increasing concerns about the slow progress in
the country's economic reform programs, due, among other things,
to malfeasance by government officials, politicians and powerful
businessmen.

The IMF has expressed disappointment over the failure of the
country's bankruptcy court to force recalcitrant debtors to
settle their debts.

The IMF has also insisted upon the establishment of an
additional independent body to oversee the Indonesian Bank
Restructuring Agency (IBRA) to ensure transparency and restore
public confidence in the powerful economic agency.

IBRA manages about Rp 600 trillion (US$77 billion) in equity
and bad loans taken over from closed, nationalized and
recapitalized banks.

While other crisis-hit countries such as Thailand and South
Korea have returned to a solid path of recovery, Indonesia's
economy is still fragile, suffering from a crippled banking
industry and moribund business sector.

Economists say that this is partly due to deep political
intervention in the implementation of reform programs.

Fischer claimed that during their short meeting he did not
tell Abdurrahman, commonly called Gus Dur, to fix this problem.

"I didn't tell Gus Dur. He told me (that) he didn't want
political intervention in his economic matters."

"And he wants to be sure that whoever is put in charge (of
state) companies, the management is clean and there is no
question of corruption. He made that very clear. I didn't raise
the issue," Fischer said, also in response to a question about
corrupt practices at state companies.

Elsewhere, Fischer praised the government for the progress
made thus far in the economic reform programs.

"I would say there's real progress, but there's still a lot of
work to be done," he said.

He cited IBRA and the Jakarta Initiative Task Force (JITF) as
bodies where much work was still needed to be done.

JITF is a debt restructuring body established by the
government in early 1998 to help facilitate the restructuring of
the country's massive corporate debt overhang.

He also said that Attorney General Marzuki Darusman promised
to make efforts to speed up the assignment of the so-called ad
hoc judges to the commercial court to handle the bankruptcy
proceedings of recalcitrant debtors.

Fischer's positive note of confidence helped the ailing rupiah
to strengthen against the U.S. dollar.

The local unit closed at Rp 7,855 per dollar compared to Rp
8,005 on Thursday, which was the lowest level in six months.

The rupiah has been under pressure since the government failed
to meet a March 31 deadline to implement the various economic
reform programs as pledged in the Jan. 20 letter of intent to the
IMF.

But the government managed to implement most of the crucial
programs by the new April deadline.

"I believe that if Indonesia carries out the programs, then
there should be a stronger rupiah ... It will be stronger than Rp
8,000," he said.

The government has targeted the rupiah to stabilize at about
the Rp 7,000 level this year.

Fischer said that an IMF team would start working today
(Tuesday) to review the country's economic reform programs.

The team, he added, would need about 10 days to complete its
work, and if everything went well the IMF board of directors
would meet toward the end of May to decide on the second
disbursement of $400 million from its bailout fund for Indonesia.

The loan was supposed to have been disbursed earlier this
month but it was held up due to the government's failure to meet
many of the reform deadlines.

Asked about the recent suggestion made by Coordinating
Minister for the Economy, Finance and Industry Kwik Kian Gie to
change the status of the IMF loan into a standby loan, Fischer
said: "It has some advantages for Indonesia and there are also
disadvantages."

He pointed out that this (change in status) would reflect
Indonesia's stronger forex reserves, "but on the other hand,
having the money is better than somebody else having it."

Fischer said that the IMF would still need more time to
discuss the suggestion further with Indonesia.

Under the current system, Indonesia must take the IMF loans
when they are disbursed.

Fischer also said the IMF would work closely with Indonesia to
implement the fiscal decentralization program correctly.
(rei/prb)