Jakarta hails progress in debt talks with creditors

Jakarta hails progress in debt talks with creditors

TOKYO (Reuters): Indonesia's Coordinating Minister for
Economy, Finance and Industry Ginandjar Kartasasmita said
yesterday that the Southeast Asian nation achieved much progress
with creditor banks during talks here to resolve its corporate
debt problem.

"I see that we have made a lot of progress," Ginandjar,
coordinating minister for economics and finance, told reporters
in Tokyo.

"There are remaining issues to be resolved and I am confident
that they can be resolved in Frankfurt (for the next round of
talks starting on May 26)," he added.

Indonesia and its creditor banks held three days of talks
which ended on Sunday without an agreement on the most thorny
issue of resolving the debt held by companies.

But the bank steering committee, a group of creditor banks,
said in a statement issued yesterday that even as more work
needed to be done for corporate debt problems, it and Indonesia
made progress in finding solutions for the problems of Indonesian
banks' foreign currency debt and trade finance.

The terms of any individual restructuring will have to be
agreed between individual debtors and creditors but it was agreed
that the framework would be voluntary and not require debt
forgiveness, the statement said.

The Tokyo talks were complicated by fresh violence in the
sprawling archipelago, where two people have died during student
protests demanding that President Soeharto resign.

But Ginandjar said that a series of riots demanding reforms in
the country was temporary and would have little effect on the
economy.

"I really think this is a short-term and temporary situation.
It's not going to make it (the economy) worse. I am very sure
about this. In Sumatra, order has been restored," he said.

He also said renewed weakness in the Indonesian rupiah was
temporary. The rupiah was being quoted at 9,125/9,350 per dollar
in late Asian trade on Monday, compared with 2,430 at the end of
June 1997, prior to a wave of devaluations.

Asked if he considered the current rupiah rate to be
reasonable, he said: "No, I don't think it's sufficient and I
would like to see the rupiah move towards 6,000 -- which is in
line with the IMF (International Monetary Fund) level."

In mid-April, the bank committee and representatives of
Indonesian government agreed to provide a framework for bilateral
negotiations in order to settle Indonesia's private external
debt.

Under the framework, Indonesia will set up a fund called
Indonesian Debt Restructuring Agency (INDRA), that would receive
debt repayments in rupiah from Indonesian firms and pay in
dollars to creditors.

The key issues under the Indonesian framework have been at
which exchange rate Indonesian corporations would repay debts and
who would assume the foreign exchange loss that could arise if
the social unrest continues in Indonesia.

"For us we go one step further (than Mexico style) by grabbing
the best rate in a continuous period of time... A 20-day moving
average has been mentioned (during the debt talks)," Ginandjar
said.

The Indonesian proposal is to employ the "best 20- or 30-day
moving average" of the rupiah rate against the dollar by the end
of the year, at which Indonesian companies repay external debts,
he said.

Indonesia's private foreign debt totaled $67.69 billion at the
end of January, $8.9 billion of which is owed by the banking
sector and $58.79 billion owed by non-bank corporations, the
country's central bank said in April.

Ginandjar said the desire of some Japanese banks for the
rupiah-yen exchange rate to be fixed under a debt-restructuring
framework had not been seriously discussed at the Tokyo talks.

"We are not really thinking about a large amount of funds to
be deposited there (INDRA), but it's going to be an ongoing
program. The government will support it."

The Indonesian government would not ask for fund contributions
to INDRA from nations such as Japan, he said.

He also called on Japan, whose banks are Jakarta's largest
creditor, to continue to support Indonesia.

Ginandjar is scheduled to meet officials including Prime
Minister Ryutaro Hashimoto, as well as business leaders, during
his trip. He will also hold a news conference on Wednesday.

Ginandjar did not make any specific requests for fresh aid
from Japan in talks here, although he asked for continued support
at an upcoming aid donor meeting, a Japanese finance ministry
official said yesterday.

A Consultative Group for Indonesia (CGI) meeting is expected
to be held in July.

The official was speaking following bilateral talks between
Ginandjar, other Indonesian ministers and Finance Minister Hikaru
Matsunaga.

Indonesia's Industry and Trade Minister Mohamad Hasan was
quoted as saying that he would like tariffs for Indonesian lumber
to be lowered and that he hoped that more Japan small and medium-
sized firms would participate actively in Indonesia.