Indonesia seeks support in implementing regional autonomy

Indonesia seeks support in implementing regional autonomy

JAKARTA (JP): The government is lobbying the World Bank, the
International Monetary Fund (IMF) and other international donors
to help Indonesia overcome feared budget shortfalls following the
implementation of wider regional autonomy next year, finance
minister Prijadi Praptosuhardjo said on Saturday.

Prijadi said the government expected the donors to confirm
their support at the October gathering of the country's donor
group, the Consultative Group on Indonesia (CGI), in Tokyo.

"We are lobbying donors in that direction," Prijadi told The
Jakarta Post in a telephone interview from Prague,
Czechoslovakia.

He declined to provide details, however, as he had to rush for
a meeting.

Prijadi, Coordinating Minister for Economic Affairs Rizal
Ramli and acting governor of Bank Indonesia Anwar Nasution are in
Prague lobbying international donors gathering there for an IMF
and World Bank annual meeting.

Indonesia is seeking around US$4.8 billion of loans to help
plug the 2001 state budget deficit in the upcoming CGI meeting.

Indonesia's economic team met with top IMF officials on
Saturday. On Friday, they met with key people at the World Bank.

The government plans to implement regional autonomy and
intergovernmental fiscal balance laws early next year.

There has been concern that the new laws, which give
provincial administrations more authority to manage local
resources, will impact negatively on the state budget, especially
in the short term.

It is feared that provinces with abundant natural resources
like oil, timber and mining commodities will demand a greater
portion of the revenue earned from them. This will mean less
funds for the central government, which will still have to
finance national programs, including supporting regions lacking
in natural resources.

Provincial autonomy will also allow local administrations to
manage their own economies, including the right to issue bonds to
help finance development programs.

Rizal was quoted by Antara as saying that provincial bonds
could be a huge problem to the national economy, especially if
provinces issue bonds at the same time as happened by China,
Columbia and other Latin American countries in the 1980s.

He said in that in China provincial administrations rushed to
issue bonds and it turned out that they could not repay them. The
central government had to take over, seriously straining the
state budget as well as the overall macroeconomy, he warned.

He said that to prevent this from happening an institutional
framework must be first set up before provincial administrations
were allowed to issue bonds.

"In the short term, there could be problems that must be
immediately resolved. That's why we need to first set up an
institutional infrastructure and regulations ..." he said.

Rizal said that regional autonomy would bring positive impacts
to the provinces over the long term, including infrastructure
development and better welfare for the people.

He also said the policy would help maintain the nation's
unity.

Several provinces with rich natural resources have recently
seen increasing demands for separation from Indonesia. (rei)