Japan signals more loans for RI after Bali

Japan signals more loans for RI 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.