Japan to continue support for RI
Japan to continue support for RI
Fitri Wulandari, The Jakarta Post, Jakarta
The Japanese government remains committed to provide financial
support for Indonesia after the latter ends the existing
International Monetary Fund program later this year, an envoy
said.
"The Japanese government will continue to support the economic
reform program of the government of Indonesia. We are ready to
provide necessary assistance," Japan's Deputy Ambassador to
Indonesia Shigekazu Sato told reporters in a media briefing on
Tuesday.
"But, the IMF's role in securing confidence and credibility
is undeniable. Therefore, the Indonesian government has to
maintain that confidence and credibility," he added.
Top government officials have said that the government would
not renew the current IMF program when it ends later this year.
This has raised concern about the condition of the country's
state budget as without the presence of the IMF, Indonesia would
no longer be able to obtain a debt rescheduling facility from the
Paris Club of lender nations. But proponents said that Indonesia
would be able to survive the post-IMF era with the current huge
foreign exchange reserves of more than US$34 billion, and the
healthy macroeconomy.
There are also doubts whether the government could implement a
credible economic reform program on its own. The IMF backing of
the previous reform program has been essential in securing
investor confidence and in lending credibility to the program.
Sato said his government would provide new loans, grants and
technical assistance, through the Consultative Group on Indonesia
(CGI) as well as through bilateral arrangements.
The Japanese government is also ready to provide policy
advisors should Indonesia need to design its own post-IMF
economic reform program, Sato added.
Japan is currently Indonesia's top donor country, contributing
some $2.23 billion in financial assistance for 2003. This
represents a third of Indonesia's total external financing needs
of around $6.3 billion.
Asked whether Japan will increase its financial assistance in
2004 if Indonesia goes ahead and ends the IMF program, Sato only
said it would be discussed in the future.
However, he expressed confidence that the Indonesian
government would manage to maintain budget discipline so that
next year's deficit would not be higher than this year's estimate
of 1.8 percent of gross domestic product.
"The Indonesian government is committed to lowering the budget
deficit and we are watching them. The government should endeavor
to cut down expenses and increase revenue so that, it won't need
higher international financing," he said.
The government is projecting a deficit of 1 percent of GDP for
2004.
On private investment, the embassy's first secretary on
financial affairs Hiroshi Ogushi said Japanese investors were
still very interested in investing in Indonesia.
"Big Japanese companies are still interested in putting their
money here. They meet regularly with Indonesia's key economic
ministers every three months," he said.
But Hiroshi acknowledged Japanese investors were facing
several problems particularly legal uncertainty, labor disputes
and poor infrastructure.
Although Japanese foreign direct investment (FDI) in Indonesia
has been shrinking in value, Japan is still the top investor
here.
For the period of 1967 to 2001, Japanese investors
cumulatively made up 14.4 percent of the total FDI, ahead of
England (12.1 percent) and the U.S. (4.4 percent).
Hiroshi suggested that apart from seeking international
financing, the government should maximize domestic revenue such
as through the bonds market.
"The bonds market is very healthy and it is a good financing
source," he said.