Minister confident reform program will be followed
Minister confident reform program will be followed
JAKARTA (Agencies): Indonesia's senior economic minister said yesterday the rupiah could strengthen to 6,000 to the dollar by the end of the year if the reform program goes well and if the country's huge private foreign debt problem can be resolved.
Ginandjar Kartasasmita, the coordinating minister for the economy, finance and industry told journalists he's optimistic Indonesia will get a "vote of confidence" from the International Monetary Fund (IMF) when it decides next week whether to resume funding for Jakarta.
The minister also expressed confidence that the reform program will be followed "strictly", which will help market sentiment about the country.
Ginandjar acknowledged that Indonesia has had "problems with credibility in the market" because it was widely perceived to violate terms of the first two agreements it reached with the IMF.
But he said credibility of the latest agreement, reached early this month, will be established as markets see how serious the government is in implementing it.
The minister said complaints about how a January decree freeing up the clove trade were being evaded have been "fully" dealt with by government ministers at a meeting Wednesday where Excise Department officials were "bluntly" ordered to ensure compliance.
Recently, some producers of Indonesia's distinctive spice cigarettes have complained they were still forced by buy from a monopoly headed by President Soeharto's youngest son.
With Wednesday's meeting, Ginandjar said, "companies will not be forced, will not be required, not persuaded" to buy cloves from any particular seller. He said the clove monopoly will be abolished one month ahead of the scheduled July 1 date Indonesia promised the IMF.
"Watch us," he asserted, saying complaints from the public and media about where Indonesia wasn't making promised reforms were welcome. Insisting the new reform program will be implemented strictly, he said. "I can assure you that there isn't any member of the (Soeharto) family involved in any monopoly."
Asked about how strongly Soeharto is personally committed to substantial economic reform, Ginandjar said the president is "strongly behind it. You may or may not believe me, (but) it's true."
The minister said the President had concerns about the previous two IMF programs but "these have been satisfied" in the newly-negotiated agreement. "There's no reason why the President should not continue to support" the new agreement, he added.
Private debt
However, he agreed that resolving the private debt problem could take time since it is complicated. But he says solutions must be worked out, because "it will cost the government a lot if we fail." Without a resolution to debt problems, Ginandjar said, "I don't think we can fully restore confidence in the rupiah."
Officials handling private foreign debt have put it around $74 billion, although some banking analysts have said the main risk amounts to around $35 billion.
Ginandjar divided the debt issue into three:
1. Companies that needed no assistance at any exchange rate;
2. Debtors with good assets and viable projects that had fallen victim to the economic climate;
3. Companies that from the beginning were poor investments with no future prospects.
He said debt restructuring efforts would be focused on the second group.
"We will concentrate on the second category. The third category will just have to go bankrupt, but creditors are at fault for approving these kinds of projects," Ginandjar said.
He said that April 30 was also the deadline for Indonesian companies to declare their foreign debts so that the government could get a proper assessment of the amounts involved.
"It's like opening up Pandora's box, but we need to know," Ginandjar said.