New agreement set to be signed today

New agreement set to be signed today

JAKARTA (JP): The government is expected to announce the
details of its newly revised agreement with the International
Monetary Fund (IMF) after the monthly cabinet meeting today.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said Monday that both parties had
finalized their agreement and would simultaneously disclose the
details of the economic reforms to the public.

But Ginandjar declined to say whether President Soeharto
himself or a minister on the President's behalf would sign the
letter of intent which revises the Jan. 15 reform package.

"After the agreement is reached we will publicly announce
it ... to enable the public to follow the implementation of the
program closely," Ginandjar said after attending a meeting of the
Economic and Monetary Resilience Council at Bina Graha
presidential office.

The council, chaired by President Soeharto, was established to
monitor the implementation of the reform package. Its members
include Ginandjar, Minister of Finance Fuad Bawazier, Governor of
Bank Indonesia Sjahril Sabirin, Widjojo Nitisastro, Tanri Abeng
and businessman Anthony Salim as secretary-general.

Ginandjar said President Soeharto had contacted several
foreign leaders, including Japanese Prime Minister Ryutaro
Hashimoto, Singapore's Prime Minister Goh Chok Tong and
Australian Prime Minister John Howard to inform them of the new
agreement.

Goh notified Soeharto on his country's readiness to use US$3
billion of its $5 billion bilateral aid commitment to Indonesia
to guarantee Indonesia's letter of credits (L/Cs) for much-needed
imports such as medicines, industrial materials, spare parts and
foodstuffs.

"Malaysia has also expressed its readiness to give $500
million for guaranteeing Indonesian imports," Ginandjar said.

Squeezed by a regional economic crisis, Indonesia turned to
the IMF for assistance last October. Backsliding by the
government on reforms in return for an IMF-led rescue package of
$43 billion led to a new accord which was signed by President
Soeharto on Jan. 15.

But differences emerged between the two sides over Indonesia's
budget and currency management, prompting the IMF to postpone the
disbursement of the second $3 billion tranche of the bailout
fund.

Safeguards

IMF First Deputy Managing Director Stanley Fischer said in
Kuala Lumpur on Monday that the IMF's new program with Indonesia
would include safeguards to ensure Jakarta undertook agreed-upon
economic reforms before it received money.

Fischer, who arrived in Kuala Lumpur Sunday after four days of
visit to Jakarta, said the safeguards would enable the IMF's
executive board to determine if Indonesia was following through
on the reforms before it made any payments to help the ailing
economy.

"What the world needs to see is not signatures but
performance, and that's what we will be looking for," Fischer
told reporters in the Malaysian capital after meeting Deputy
Prime Minister Anwar Ibrahim.

"When an agreement is reached, and I expect one will be
reached, you will see some further safeguards that are contained
in the program to make sure that it is carried out," Fischer was
quoted by Reuters as saying.

Asked what kind of safeguards would be built-in, Fischer said:
"Much more careful monitoring, agreed monitoring between us and
the Indonesians to make sure that measures which have been
committed are undertaken."

The fund's executive board will meet two or three weeks after
the signing of a new letter of intent, but will only approve the
program if reform measures are underway.

"There are a lot of prior measures, actions which would be
taken between the time the letter of intent is signed and the
time we go to the board, so a lot would be done by the time the
board makes an agreement to make the payments," Fischer said.

Fischer welcomed Indonesia's decision to freeze the licenses
of seven banks and place seven others under the management of the
regulatory Indonesian Bank Restructuring Agency.

"It's very important. It's a step toward, a major step toward
cleaning up the banking system, to restoring it to health," he
said.

"It also happens, it wasn't intentional, that several of the
banks that were taken over are politically well-connected but
there was no favor shown, and that's a very important component
of the program."

Two of the banks are partly controlled by a cousin of
President Soeharto. Two other banks are controlled by a
businessman whose brother is married to one of Soeharto's
daughters. All four banks had their licenses frozen.

Separately, World Bank vice president for Asia and the Pacific
Jean Michel Severino and country director for Indonesia Dennis de
Tray noted here Monday that it was critical for Indonesia to have
a package of policy measures that would very much build on what
had already been discussed.

The implementation of the reform would give more confidence
to the market, domestic and international, and help restore
growth, Severino told a news conference.

"But we also need a package which addresses the core social
problems of the country and help the poor people cope with the
social impacts of the currency turmoil," Severino added.

"I think the government is very aware it is expected to
act ... One is going to see confidence only on the basis of
facts.

"One should give the benefit of the facts and the time to this
new government and see and judge what they are doing on the basis
on what they deliver," Severino said.

De Tray said the Indonesian government recognized that there
were no silver bullets, no magic medicine, to rectify the
situation at this stage.

"The government is extremely aware of the fact that it needs
to convince the market, both domestic and international, of their
sincerity in implementing this program. They are aware of the
challenges ahead them.

"This program in itself isn't going to restore the confidence,
it is the government's commitment to implement it, the
government's action on the ground that will slowly rebuild that
confidence. The more transparent they implement it, the quicker
the confidence will come back," de Tray said. (prb/rid)