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)