Mon, 24 Apr 2000

IMF's Fischer arrives for review of reform

JAKARTA (JP): International Monetary Fund (IMF) Acting Managing Director Stanley Fischer plunged into a series of meetings on Sunday with senior officials immediately after arriving here to review Indonesian reform programs.

Fischer met with Attorney General Marzuki Darusman to discuss the latest developments in judicial reform, one of the most important elements of the country's reform programs.

Fischer, who is acting chief of the IMF until the installation of Horst Koehler as new managing director to replace Michel Camdessus, also held a meeting with finance minister Bambang Sudibyo later in the evening.

He held a brainstorming session with several economic advisors to the President, including Emil Salim, Sri Mulyani Indrawati, Faisal Basri, Boediono and Bambang Subiyanto.

"The main reason for my visit is to reassure President Wahid of the IMF's support for Indonesia's economic program," Fischer said earlier in an arrival statement.

The IMF acting chief is scheduled to meet with President Abdurrahman Wahid on Monday morning and later with House of Representatives Speaker Akbar Tandjung.

The review, the first to be made of Indonesian reform measures after the renewal of the IMF bailout program for the country on Jan. 20, is almost one month behind the original schedule as the government failed to meet many of the reform deadlines.

The multilateral agency, disappointed with the Indonesian government's failure to implement many reform measures on schedule as agreed on in the Jan. 20 letter of intent, held up the second disbursement of its loans, originally planned for early this month.

Fischer, however, said on Sunday he was encouraged by the pace of Indonesia's economic reform over the past few weeks.

He nevertheless warned that the government must not waver from the program demanded by the IMF.

"I'll explain how it's essential to keep the program on track," he said of his upcoming meeting with President Abdurrahman on Monday.

Fischer added he was also encouraged by the favorable Paris Club meeting on April 12, which agreed to reschedule US$5.8 billion of Indonesia's official debts, due to mature between April 2000 and March 2002.

But the Paris debt rescheduling agreement still depends on the IMF review on Indonesian reform programs this week.

"We are hopeful that the mission, which will start its work under Mr. Anoop Singh's leadership within the next few days, will be able to make a positive recommendation on the completion of the review," Fischer added.

Singh is the new IMF director for Asia and the Pacific region, replacing Hubert Neiss.

The IMF chief representative here, John Dodsworth, said recently that if all went according to the new schedule, Indonesia could expect the IMF executive board to approve the release of the second tranche of $400 million in loans some time in mid-May.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said last week the government had implemented more than 90 percent of the reform measures.

The IMF has been demanding urgent measures, especially in debt, bank and corporate restructuring.

Fischer said positive developments had been made in the framework for corporate restructuring.

Sri Mulyani later told reporters that the IMF was keenly following the preparations being made for the decentralization of political and economic power to the provinces and districts.

"The IMF sees a broader autonomy for the regions as the best way of empowering local administrations," added Mulyani, the secretary of the National Economic Council.

But the IMF also cautioned that local administrations should be fully aware of the macroeconomic and fiscal consequences of the decentralization process, she said.

She said Fischer also touched on a recent complaint from Bambang who said the pressure from the IMF was too excessive on the Indonesian government with regard to the implementation of reform measures.

Fischer, Mulyani said, suggested that the IMF and the government engage in more vigorous discussions on reform measures to develop a better understanding.

She said the IMF would also closely examine the bank restructuring program and the imposition of value-added tax and luxury sales tax on domestic sales on Batam, Bintan and Karimun islands.

The taxes, which are supposed to be collected as of this month, have been opposed by locals and businesses and many foreign investors.

Fischer will leave Indonesia after addressing a news conference at the House of Representatives following his talks with Tandjung on Monday.