IMF reforms taking too long, says Aburizal

IMF reforms taking too long, says Aburizal

JAKARTA (JP): Indonesia cannot afford to wait any longer for
the IMF reform program to stabilize the ailing rupiah, the
chairman of Indonesia's Chamber of Commerce and Industry said
yesterday.

Aburizal Bakrie said he appreciated advice from foreign
governments and international financial institutions that
Indonesia should fully implement sweeping IMF-sponsored reforms
to deal with the economic crisis.

"But we are the ones who must decide what is best for our
country. We can't wait for another six months or one year for the
results of the reforms," he said at a ceremony in which several
companies handed out basic commodities to low-income people.

Aburizal said the most important step toward salvaging
Indonesia's wrecked economy was not scrapping monopolies and
other restrictive trade practices as prescribed by the IMF, but
stabilizing the rupiah.

He has previously said the government needed to launch an
alternative effort referred to as the "IMF-Plus" to stabilize the
rupiah.

The "IMF-Plus" concept was mentioned by President Soeharto on
Sunday during his accountability speech to the People's
Consultative Assembly. Analysts believe the plan would combine
the IMF reform programs with the controversial currency board
system which would peg the rupiah to a hard currency like the
U.S. dollar at a fixed exchange rate.

The country is currently suffering from its worst ever
economic crisis, which has seen the rupiah plunge in value to as
low as Rp 17,000 to the U.S. dollar in January from Rp 2,450 last
July. Massive layoffs and soaring domestic prices have been the
result of the currency woes.

The rupiah lost further ground in thin trading early
yesterday, closing at 10,500 against the dollar due to concern
that the IMF might not disburse the second tranche of its loan to
Indonesia.

The government announced Monday that the inflation rate for
February was a record 12.76 percent, compared to only 1.05
percent in the same month last year.

Many analysts believe February's figure indicates that
Indonesia's economy could fall to hyperinflation, which in turn
may cause widespread protests and riots.

The rupiah's sharp depreciation has hit importers especially
hard, not only due to the sharp increase in rupiah-based prices
of the imported products but also due to credit difficulties.

Most letters of credit issued by local banks to import and
export firms have been rejected by overseas banks due to the
crisis, prompting worries over the availability of imported raw
materials. Many firms have reported that they only have enough
supplies to operate through April.

Analysts say many production firms import up to 50 percent of
their raw materials and that they would be unable to continue
production unless a solution can be found to the country's letter
of credit puzzle.

"We need... to stabilize the rupiah so the inflation of
imported materials can be pushed down to lower the prices of
basic items," said Aburizal, who is also chairman of the Bakrie
Group.

He called on Indonesians to support President Soeharto in
implementing any policies to strengthen the rupiah to normal
levels.

Although the President signed a letter of intent on Jan. 15 to
implement IMF reform programs in exchange for a US$43 billion
bailout fund, he indicated early last month that Indonesia would
need to set up a currency board to stabilize the rupiah.

The currency board plan has angered Indonesia's major donor
countries and the IMF, which has threatened to stop providing its
funds if Indonesia went through with the idea.

The IMF provided Indonesia $3 billion in November and is
scheduled to hand over a second tranche of another $3 billion in
the middle of this month.

IMF officials are currently reviewing the country's
seriousness in implementing the reforms and should it consider
that Jakarta has not been living up to its agreement, the
institution could withhold the second installment of funds.

Critics say that now is not the appropriate time for Indonesia
to establish a currency board.

Analysts say a positive assessment from the IMF is also needed
to get letters of credit guarantees from the country's major
trading partners, many of which have agreed to open trade
facilities. (08)