Indonesia wants IMF to show more flexibility

JAKARTA (JP): Indonesian wants the International Monetary Fund to show flexibility during negotiations on the country's reform program, especially on issues which have potential to adversely affect the poor, such as abolishing certain trading monopolies.

Minister of Finance Fuad Bawazier said yesterday that Indonesia would basically implement the 50-point agreement and would dismantle cartels and monopolies.

However, not all points of the agreement will be implemented on time. In some cases, he said, society was not yet prepared for the adjustments.

Bulog, the National Logistics Agency, should have surrendered it's trading monopoly on agricultural commodities, excluding rice, on Feb. 1. "However, the private sector has not been able to replace Bulog's role," Fuad told journalists.

"They do not have the necessary facilities, such as warehouses. So they are not yet ready. Once they are ready, we will liberalize trade," he added.

Fuad leads the Indonesian delegation to the budgets and subsidies discussion group, one of five such entities formed by the IMF and the government to review the US$43 billion reform package.

The other four groups focus respectively on monetary policy, banking reform, structural reform and external corporate debt.

Fuad said that due to instability, the government and the IMF had agreed not to revise the 1998/1999 budget, which comes into effect next month.

Next years budget has already been revised as a result of strong pressure applied by the IMF, who felt the first draft to be unrealistic.

The new budget assumes a rupiah-U.S. dollar exchange rate of Rp 5,000, crude oil priced at US$17 per barrel and a 20 percent inflation.

The rupiah is currently trading around the Rp 10,000 level and oil prices have fallen to US$13 per barrel.

Fuad also said that the government would continue to subsidize the imports of basic commodities, especially rice, and would accommodate the subsidy into the budget.

The monetary policy and banking reform groups also met yesterday at the Ministry of Finance. The Indonesian delegations were led by Sjahril Sabirin, the central bank governor.

"I cannot comment on the meeting as it is still proceeding," Sjahril said.

The structural reform group met at the Ministry of Industry and Trade, with minister Mohamad (Bob) Hasan leading the Indonesian delegation. IMF Asia Pacific director Hubert Neiss led the donor organization's team.

"We're in the middle of discussions, it's not appropriate to get into any details or substance of the discussions," Neiss said after yesterday's meeting.

"Once we've finished, I'll be happy to talk to you again," he added.

Hasan said that "discussions will continue."

Following the meeting, Hasan met with World Bank country director Dennis de Tray for discussions on the Indonesian economy.

"We talked about projects here and reforms .... issues associated with reestablishing confidence in the Indonesian economy," de Tray told reporters after the meeting.

De Tray said they also discussed the need to move banking sector reforms forward very quickly and on how to resolve the corporate debt problem.

A meeting was also held between the IMF and the government's debt settlement team at the National Development Planning Board's office. The Indonesian delegation was jointly led by State Minister for the Empowerment of State Enterprises Tanri Abeng and Radius Prawiro, chairman of the debt settlement team. The meeting ended on an optimistic note.

Radius said the meeting yesterday was "full of sincerity to formulate the best way to quickly solve the external corporate debt problem."

"It is important to quickly solve the debt problem because rebuilding foreign investor confidence in this country depends on how we solve this problem," Radius told journalists following the meeting.

He stressed that as a member of the IMF, Indonesia had the right to ask for aid and assistance.

"If there are problems we should be able to solve them by discussion," he said, referring to an impasse between the government and the IMF over delays in disbursing the second tranche of aid from the IMF rescue package worth US$43 billion. (08/das/rid)