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.