New target dates for economic reform package
JAKARTA (JP): The following are new target dates for Indonesia's economic reform program agreed with the International Monetary Fund (IMF) Wednesday. Since the IMF-sponsored reform program was launched last October, the government has completed more than 60 points of economic reform in various fields contained in the program. The IMF has arranged a US$43-billion bailout to support the program.
By end-June 1998:
- Reduce the minimum capital requirements for existing banks.
- Establish independent review committee to enhance transparency and credibility of the Indonesian Banks Restructuring Agency's (IBRA) operations. (Two Indonesian members have been nominated and three foreign members are expected to be appointed, one each to be nominated by the IMF, the World Bank and the Asian Development Bank).
- Issue a revised and shortened negative list of activities closed to foreign investors.
- Auction forest concessions and lengthen concession periods (delayed).
- Allow transferability of forestry concessions and delink their ownership from processing for new concessions.
By Mid-July 1998:
- Declare insolvency of six private banks intervened in April and write down shareholder equity. Starting mid-July 1998:
- Take action to freeze, merge, recapitalize or liquidate the six banks for which audits have already been completed.
By end-July 1998:
- Issue presidential decree to provide appropriate legal powers to IBRA, including its asset management unit (expected by mid- July).
- Announce plan for restructuring state banks through mergers, transfers of assets and liabilities or recapitalization prior to privatization.
- Merge Bank Bumi Daya and Bank Pembangunan Indonesia (Bapindo) and transfer their problem loans to the asset management unit of IBRA (delayed from end-June).
- Submit to Parliament a draft law to eliminate restrictions on foreign investments in listed banks and amend bank secrecy with regard to nonperforming loans (delayed from end-June).
- Draft legislation enacting state bank privatization (delayed from end-June).
By end-August 1998:
- Conduct portfolio, systems, and financial reviews of all IBRA banks as well as major non-IBRA banks by internationally recognize audit firms.
- Submit to Parliament a draft amendment to the banking law, incorporating procedures for the privatization of state banks and the removal of the limits on private ownership of banks. By end-September 1998:
- Complete action plans for all 164 state enterprises.
- Establish clear framework for reform of all state enterprises, including privatization and restructuring. Also establish transparent sales process.
- Develop a plan for closing nonviable public enterprises.
- Initial sales of additional shares in listed state enterprises including, at a minimum, the domestic and international telecommunications corporations.
- Complete divestiture of two state enterprises that are presently unlisted.
- Complete action plans for restructuring banks under auspices of IBRA.
- Submit to Parliament a draft law to institutionalize Bank Indonesia's autonomy (previously December 1998).
- Initiate first case of an IBRA bank under the new bankruptcy law.
- Abolish quotas limiting the sale of livestocks.
- Prepare regulations establishing procedures for mergers, acquisitions and exit which facilitate corporate restructuring while safeguarding against anti-competitive behavior.
By end-October 1998:
- Conduct portfolio, system and financial reviews of all non-IBRA banks by internationally recognized audit firms. By end-December 1998:
- Reduce export taxes on logs and swan timber to 20 percent.
- Complete divestiture of two additional state enterprises that are presently unlisted.
- Submit to Parliament draft law on competition to prevent the abuse of dominant position and practices that restrict or distort free competition.
- Complete audits of state oil and gas firm Pertamina, the State Logistic Agency (Bulog), state electricity firm PT Perusahaan Listrik Negara and reforestation fund.
- Establish clear profit and performance criteria for government enterprises.
- Audit nonviable public enterprises.
- Draft and establish implementation rules for the new environmental law.
- Accelerate programs for converting to cleaner fuels.
- Implement performance bonds and reduce land conversion targets to environmentally sustainable levels.
By end-March 1999:
- Complete sales of additional shares in listed state enterprises.
- Complete divestiture of three additional state enterprises that are presently unlisted.
- Prepare plans for sale of at least one quarter of IBRA banks in 1999.
- Prepare mechanism for the regular adjustment of administered food prices.
Fiscal year 1998/1999:
- Ensure reforestation funds used exclusively for financing reforestation programs.
- Introduce community-based work programs to sustain purchasing power of poor in both rural and urban areas.
- Introduce micro credit scheme to assist small businesses.
Ongoing:
- Accelerate provisions under the Nontax Revenue Law of May 1997 to require all off-budget funds to be incorporated in budget within three years (instead of five years).
- Impose limits on and phase out Bank Indonesia (BI) credits to public agencies and public sector enterprises.
- Strengthen BI's bank supervision department and strengthen enforcement of regulations.
- Establish program for divestiture of BI's interests in private banks.
Over program period:
- Conduct revenue review with IMF assistance (first step by end- September 1998).
- Eliminate all restrictions on bank lending except for prudential reasons or to support cooperatives or small-scaled enterprises.
- IBRA will continue to take control of or freeze additional banks that fail to meet liquidity or solvency criteria. Where necessary, any such action will be accompanied by measures to protect depositors or creditors in line with the government guarantee.
- Introduce deposit insurance scheme.
- Eliminate all export restrictions.
By end program:
- Phase out remaining quantitative import restrictions and other non-tariff barriers.
By 2000:
- Phase out local content program for motor vehicles.
By 2001:
- Prepare state banks for privatization.
By 2003:
- Gradually reduce tariffs on non-food agricultural products to a maximum of 10 percentage points.