Japan to offer new aid for Indonesia

The Jakarta Post, Jakarta

Japan Prime Minister Junichiro Koizumi will offer Indonesia new aid to support the country's economic recovery, when he meets President Megawati Soekarnoputri in Jakarta tomorrow, said foreign minister Hassan Wirajuda on Thursday.

But a senior official at the Japanese Embassy ruled out the possibility of Japan pledging new loans during Koizumi's visit.

"As part of his (Koizumi) visit, various new commitments will be presented," Hassan told reporters after a Cabinet meeting.

Koizumi is to arrive in Jakarta on Saturday as part of his seven-day tour covering Southeast Asian countries.

Hassan said one key point on the agenda for discussion during his visit here was ways to expedite Indonesia's economic recovery.

"There will be talks on getting together the details for Japan's support," he said.

Japan is the biggest bilateral creditor to the country, and among Indonesia's most important trade partners.

However, Koizumi's visit to Jakarta comes at a time when Tokyo is mulling over slashing its financial aid to Indonesia.

Mired in recession, Japan has considered reviewing its Official Development Assistance (ODA) policy toward Indonesia.

Signs of this surfaced when Japan cut its loan pledge under the Consultative Group on Indonesia (CGI) to $720 million from $1.56 billion at the previous CGI meeting.

Japan along with the World Bank and the Asian Development Bank have been the biggest contributors under the CGI, which groups together Indonesia's sovereign creditors.

Now, instead of spending more, Tokyo has shown signs of leaning toward receiving less from Indonesia under more generous debt restructuring terms.

Japan has said it provides about one third of all Indonesia's external financing needs, estimated at some $7 billion this year.

As only $720 million was pledged under the CGI forum, most of its support would likely come through debt restructuring talks at the upcoming Paris Club meeting.

First Secretary for financial affairs at the Japanese Embassy, Hiroshi Ogushi said there were no plans for new loans outside those pledged under the last CGI meeting.

"There are many other ways to cooperate," he told The Jakarta Post, adding the new aid programs were being finalized.

He declined to elaborate on them, but cited they might also cover noneconomic aid programs.