Koehler uneasy with recent RI political moves

Koehler uneasy with recent RI political moves

HONG KONG (Dow Jones): International Monetary Fund (IMF) Managing Director Horst Koehler on Thursday expressed discomfort with recent political moves in Indonesia, but pledged his willingness to work with any new policy makers put forward in the country.

The Indonesian parliament's effort to oust the country's first democratically elected president, Abdurrahman Wahid, is a "tragedy clearly," Koehler told Dow Jones Newswires in Hong Kong.

However, he signaled that the IMF is comfortable to see that the process is progressing in line with democratic ideals, and will work with any new government that is installed along those lines.

The Washington-based lender's program in Indonesia has been suspended since December over the government's failure to implement past agreements.

Koehler reiterated a long-standing IMF policy on government changes.

He said the organization will work with a new Indonesian government team, if one comes to power, as seems likely. The parliament on Wednesday overwhelmingly called on the People's Consultative Assembly, the nation's highest legislative body, to convene a special session and impeach Abdurrahman for alleged corruption and incompetence.

Koehler, while refraining to comment directly on the process, expressed a hope that any change will follow legal procedures.

Nevertheless, Koehler didn't hide his discomfort about the political turmoil unfolding in the world's fourth most-populous country.

"It's a tragedy clearly because we should not forget that President Wahid is the first democratically elected president (in Indonesia)," Koehler said.

There is little he can do, Koehler said, if Abdurrahman is kicked out according to law. "On the other hand, if it is also a democratic procedure," Koehler said, "it's not up to me to comment on that or even to judge."

"We will wait for the outcome. We hope that it is a democratically sound, clean process," he said. "And we will work with the institutions and the people that are legitimized by this process."

The IMF had also been assured just a week ago by the Thai government that there would be no change in the running of Bank of Thailand, and Koehler has already expressed his surprise at this week's ouster of Governor Chatu Mongol Sonakul.

Koehler said Thursday that the events don't necessarily signal a change in the IMF's relationship with that Southeast Asian nation.

"It seems really there is some basis (to talk the firing reflected a) personal climate between the acting people," Koehler said.

He noted that the IMF itself has new people at the helm, so "these personal matters, we should not talk so much about it. We are interested in good policies, and therefore I want to see more details about this, and if we feel it is not the right way, we will speak up."

But Koehler did say that although the IMF is willing to listen, he isn't convinced now that higher bank deposit rates will help get the Thai economy moving.

Thai Prime Minister Thaksin Shinawatra - himself facing a corruption trial that could result in his ouster - has pushed such a policy in order to shore up support among the Thai people, according to analysts.

Chatu Mongol had opposed pushing banks to lift rates, and banks themselves have also been cool to the idea. "I must say I have difficulties to understand it right away," Koehler said.

"We need really to listen to know better, understand better what is the rationale behind this idea to raise rates for depositors," Koehler said. "For investments, small and medium enterprises, they are interested not in higher rates - for them it's a cost factor - but in lower rates maybe."