Neiss gives green light after government talks

JAKARTA (JP): International Monetary Fund's (IMF) Asia Pacific director Hubert Neiss ended his one-week visit late on Friday, satisfied over Indonesia's handling of the high-profile Bank Bali scandal.

Neiss said he was satisfied with the result of his talks with the new government, particularly with the decision to publish the full PricewaterhouseCoopers (PwC) audit on transactions relating to the Rp 546 billion (US$80 million at current rate) bank scandal and to take legal action against the suspects.

"The Bank Bali scandal is resolved. Now the international community can come in to work with the new government," Neiss told reporters before leaving for Washington.

The IMF suspended its loan disbursement to Indonesia in the middle of September after the previous administration of B.J. Habibie failed to honor its promise to disclose the full PwC audit.

The Bank Bali scandal centers around the "legally dubious" transfer of some $80 million from the bank to a private firm linked to influential government officials and businessmen who are allegedly close to Habibie.

The PwC report lists the names of people allegedly involved in the scandal, and receiving a portion of the Bank Bali money.

The IMF is organizing a multibillion dollar bailout for Indonesia. The IMF has so far disbursed some $9.5 billion out of its total commitment of $12.3 billion.

Many have said that it is not just the money that matters, but support of the IMF encourages the return of investor confidence, a crucial factor for the country's economic recovery.

Before the fund disburses its loan to Jakarta, Indonesia must first reach an agreement with the IMF on a letter of intent (LoI), which is basically a set of strategies for Indonesia's economic programs to be financed by the fund.

Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie said on Friday the IMF had agreed to send its technical team to Jakarta next week to start designing a new LoI with the government economic team.

He said the new LoI is expected to be completed sometime in the middle of December, and which would be sent to the IMF board of directors to be used as a basis for the loan disbursement.

Indonesia is expected to receive some $460 million once the fund approves the new LoI.

The IMF said on Friday it would resume talks in Jakarta next week on the possibility of resuming lending to Indonesia, which is anxious for fresh money in the face of a budget shortfall.

"Directors agreed that a mission should resume discussions over Indonesia's program in Jakarta next week," the IMF said in a statement.

IMF experts will discuss Indonesia's economic plans, including the detailed letter of intent, listing the policies Indonesia plans to adopt.

U.S. Treasury Secretary Lawrence Summers held out on Friday the prospect of a likely resumption of lending to Indonesia by the IMF, noting Jakarta had taken some steps to meet IMF concerns.

Appearing before the Senate Committee on Foreign Relations, Summers added that he is unable to provide any date for the IMF to remove its suspension on lending to Indonesia.

"I think there have been some encouraging signs, particularly with respect to identifying and doing something about some of the most egregious instances of corruption," Summers told the committee.

"Certainly, there are a number of other criteria that have to be met before new lending will take place," he was quoted by Dowjones as saying. (rei)