Tue, 26 Sep 2000

Indonesia may face tough time at upcoming CGI meeting

JAKARTA (JP): The government may have a hard time convincing the international donors grouped in the Consultative Group on Indonesia (CGI) to support the 2001 state budget deficit, former finance minister Bambang Sudibyo cautioned here on Monday.

Bambang said that the donors would thoroughly question the new economic team on several unresolved national issues, particularly the recent Atambua incident in which three United Nations humanitarian workers were killed by pro-Indonesia East Timor ex- militiamen in East Nusa Tenggara.

"I think the next CGI meeting will not be as smooth and as easy as the one held in Jakarta last November because of the potential national issues to be questioned by donors," he told reporters on the sidelines of a seminar on the economy.

"What I feel now is intense (international) pressure on the country," he added.

Bambang was dropped by President Abdurrahman Wahid in August during a massive Cabinet reshuffle.

The next CGI meeting is to be held in Tokyo in the middle of next month. The government has said it expects some US$4.8 billion from the donor grouping to help finance part of the 2001 state budget deficit estimated at Rp 53 trillion ($6.23 billion).

The Abdurrahman administration is currently under strong pressure from the international community over the Atambua incident, with the U.S. threatening to launch an economic embargo if government fails to take action against the perpetrators of the incident which reports said involved military officials.

Bambang said other issues that must be explained by the government at the upcoming donors' meeting included environmental issues, the communal clashes in Ambon (in Maluku province), legal reform, good governance and corruption.

"Other potential issues may also include Bruneigate and Buloggate," he said, respectively referring to the case of Abdurrahman personally receiving a cash contribution from the Sultan of Brunei and the alleged corruption of funds by people linked to the President from the State Logistics Agency or Bulog.

Bambang said that the loan from CGI was crucial for the country because it would be a major source of plugging the budget deficit.

"I heard that the government is expecting some $4.8 billion from CGI," he said.

He said that if the country failed to secure the CGI loan, the government would have to significantly cut the budget deficit to a level that could be covered by proceeds from the privatization of state companies and the sale of assets under the Indonesian Bank Restructuring Agency (IBRA).

"But if this would mean that the government would be forced to slash spending for development programs (investment) and the budget would have a contractive, instead of expansive, impact on the economy. This is the problem," Bambang added.

The country's new economic team, however, has openly expressed confidence that the donors will support Indonesia at the next Tokyo meeting.

Coordinating Minister for the Economy Rizal Ramli, Minister of Finance Prijadi Praptosuhardjo and acting governor of Bank Indonesia Anwar Nasution are currently in Prague, Czechoslovakia, to lobby the donors gathering for the International Monetary Fund and World Bank annual meetings.

Separately, New York Times columnist Thomas Friedman said in the seminar that he doubted the U.S. would impose an embargo on Indonesia.

He said that the threat was merely a signal to push the Indonesian government to resolve the Atambua killings. "There will be no embargo, trust me," he said.

Bambang added that the current economic team would face a tough challenge in designing the state budget because of the implementation of the new regional autonomy policy starting in January.

"The challenge for the government to design the next state budget is quite formidable," he said.

He explained that because of the autonomy policy, the government had to allocate a hefty Rp 70 trillion of the 2001 state budget to provinces, while the central government also had to finance other "big items", notably the cost of the bank recapitalization program, estimated at between Rp 70-80 trillion, and the cost of various subsidy programs, at more than Rp 40 trillion.

"That's why the government has to make a deficit budget ... and one source of financing the deficit is a foreign loan from CGI," he said.

Earlier, on the weekend, Prijadi told The Jakarta Post from Prague that the government was lobbying the international donors to provide assistance to help overcome the negative impact of the implementation of the autonomy policy on the state budget. (rei)