Japan signals more loans for Indonesia after Bali
Kornelius Purba, The Jakarta Post, Jakarta
Japan will likely agree to an Indonesian request for more loans to cope with the economic fallout from the terrorist strike in Bali during a planned meeting between the two countries' leaders in Mexico on Saturday.
During their bilateral meeting, Prime Minister Junichiro Koizumi is expected to signal his government's commitment to providing all necessary economic assistance, including the possible provision of additional loans for fiscal 2003.
According to Shigekazu Sato from the Japanese Embassy in Jakarta, Koizumi and Megawati will discuss the latest situation in Indonesia after the Bali blast, and how Japan can assist Indonesia in resolving its economic difficulties.
"I suppose the prime minister will express the position of the Japanese government regarding our continued assistance to the Indonesian government," Sato told The Jakarta Post on Friday.
Koizumi's pledge would pave the way for Indonesia to secure additional loans from the World Bank-led Consultative Group on Indonesia (CGI). The group members will hold an informal meeting in Jakarta next Friday to discuss the extent of their loan commitments to Indonesia.
Sato declined, however, to mention the amount of the loans Japan would extend to Indonesia next year or the amount that had been requested by the Indonesian government.
Japan provided US$700 million out of the total $3.14 billion in loans pledged by CGI members last year. These loans were essential for covering the state budget deficit.
For next year, the government had pegged the amount at less than $3.14 billion, citing a lower 2003 budget deficit of around Rp 26 trillion (about $2.8 billion).
But with the impact of the Oct. 12 terrorist strike now likely to widen next year's budget deficit, the government has said it hoped Japan would raise its loan commitments.
"We will only know the amount after the meeting," Sato said.
The Koizumi-Megawati summit will be held on the sidelines of the Asia Pacific Economic Cooperation (APEC) summit in Los Cabos, Mexico. It will be their second meeting this year, after Koizumi's visit to Jakarta in January. They also have the chance of meeting again in Pnom Penh during the Association of Southeast Asian Nations (ASEAN) summit with its three dialog partners, Japan, China and South Korea, early next month.
Another CGI member, the Asian Development Bank (ADB), said on Friday it would lend between $600 million and $1.2 billion per year to Indonesia between 2003 and 2005, depending on the government's efforts to reform its economy.
The Manila-based bank -- one of Indonesia's major donors -- approved a three-year lending strategy for the country.
The exact amount lent to Indonesia "will depend on various factors, including the state of structural reforms, the level of government action to reduce poverty, strengthened governance and the fiscal capacity of local governments," the bank said in a statement as quoted by Dow Jones.
Despite reining in its public spending and taming its huge sovereign debt, Indonesia has moved slowly to reform its economy this year. This includes a failure to reduce corruption in the legal system.
About half of the bank's loans will be aimed at poverty alleviation projects, with a similar amount going toward boosting longer-term growth, the statement said. ` Last year, Indonesia asked for $3 billion in aid to support the budget and reduce poverty, and is expected to ask for a similar amount this year.
But some government donors, including Australia, have said they will not make formal pledges until Indonesia increases its efforts to bring to justice those responsible for the Bali bombings, which killed more than 180 foreign tourists and injured more than 300.
The World Bank decided to postpone a formal meeting of the CGI until early next year so as to give the government time to address terrorism. The bank also said donors would need more time to assess the economic damage from the blast, which has dealt a major blow to tourism here.