Kwik calls for unilateral moratorium on debts

Kwik calls for unilateral moratorium on debts

The Jakarta Post, Malang, East Java

State Minister of National Development Planning Kwik Kian Gie
continued his attacks on the International Monetary Fund and
lambasted other multilateral and sovereign creditors for what he
called collaboration to plunge Indonesia into a debt trap.

Kwik accused the international creditors of nurturing a
borrowing culture within the Indonesian government and ganging up
to make "us a beggar nation that is now being forced to sell our
assets at throw-away prices".

"It is high time that we stand up and say enough is enough and
unilaterally declare a moratorium on our foreign debts even at
the risk of being isolated by international creditors," Kwik said
in a paper distributed at the 15th congress of the Indonesian
Economists Association.

Kwik was scheduled to deliver a speech during a lunch session
at the conference on Tuesday, but he was on an overseas visit.

"The government is now flat broke with over US$75 billion in
foreign debts and Rp 600 trillion in domestic debts. It is now
unable to adequately provide public services and has to succumb
to policies dictated by international creditors."

He reiterated his demand that Indonesia totally disengage
itself from any arrangement with the IMF so that the government
can act as a truly sovereign entity that is responsible for
cleaning up its own house.

"We should have the courage to regain our national dignity
even at the risk of being isolated by international creditors.
After all, the majority of our people in the rural areas do not
gain any benefit from foreign capital and remain untouched by the
globalization process."

Kwik blamed much of the economic debacle Indonesia is now
mired in on the erroneous policies international creditors and
the IMF have dictated to the government.

"International creditors should bear part of the losses caused
by our default because, like banks, they should have assessed
Indonesia's debt-servicing ability before approving their loans".

He said the World Bank and IMF always preach that banks should
make adequate provisions for their loans and write off bad
credits. "Why don't they treat Indonesia like that."

Rizal Ramli, former chief economics minister, another leader
of the camp staunchly opposed to a renewal of the IMF program in
Indonesia, reiterated his arguments on Monday as to why Indonesia
should totally disengage from any IMF arrangement later this
year.

Rizal told the congress session on Indonesian strategy after
exiting the IMF arrangement, that the success rate of the IMF
programs had so far been very low or only around 30 percent and
even this poor record had been made mostly in small countries in
their early stages of development.

"Indonesia does have internal weaknesses of its own. But the
IMF policy blunders have been responsible for aggravating these
weaknesses and plunging Indonesia into a graver economic crisis,"
he pointed out.

Rizal said the macroeconomic stability was driven mainly by
external factors such as the weakening dollar and the steady
decline in American interest rates.

"The strengthening rupiah, declining inflation and interest
rates are only intermediate targets that do not mean much without
the creation of jobs. This financial stability is meaningless if
the unemployment rate remains very high as it is now."

According to him, what is really needed is a strong export
expansion, higher capacity utilization within the manufacturing
industry and a more vigorous investment climate.

"All this should be the focus of debates about Indonesia's
strategy regarding the termination of the current IMF program.
The real issue is not about what kind of IMF arrangement
Indonesia should enter into after the program ends later this
year," he asserted.

If Indonesia remains under IMF supervision, its growth will
languish at around 4 percent, far from sufficient to absorb the
huge pool of the unemployed and new job seekers, he said.

"However, if we become the boss of our own policy-making and
implementation, we can accelerate the growth to at least 6
percent by stepping up structural measures in tax administration,
better fiscal and domestic debt management and optimization of
revenue from natural gas,"

Rizal hastily added, however, that all these measures depend
on a number of preconditions, especially strong national
leadership, security, political stability, secure property rights
and effective rule of law.

But while almost all the structural measures he proposed have
been stipulated in the government's reform program with the IMF,
Rizal failed to explain how the termination of the relationship
with the IMF would contribute to the acceleration of the reforms.

He could not explain either how total disengagement from the
IMF program would create the preconditions needed for the success
of the policy recommendations, which he suggested as an
alternative course to the IMF program.

The low credibility of the government's policy-making and
implementing capacity has been the main concern of those who have
suggested that Indonesia only gradually disengage itself from the
IMF.

Supporters of continuing IMF supervision of Indonesia's reform
program, at least until the election of a new government later
next year, have argued that it is unwise to take the risk of
rocking the "boat of market confidence", especially in view of
the risks of political turbulence during the 2004 election year.