Parts of IMF deal run 'against constitution'

Parts of IMF deal run 'against constitution'

TOKYO (Agencies): Indonesia wants to stick to a 50-point deal
agreed with the IMF but some parts could be unconstitutional,
Vice President B.J. Habibie said here yesterday.

On a day of conflicting signals from Habibie's meetings with
Japanese leaders, he first said the whole 50-point IMF reform
program would help the Indonesian economy and then appeared to
backtrack.

"The Indonesian economy will improve substantially if the
country abides by all 50 points," Habibie told senior Japanese
policy makers, according to a foreign ministry official.

He then visited the country's most powerful business group,
the Federation of Economic Organizations (Keidanren), and said
Jakarta could complete most of the 50 points but agriculture
would be a problem.

"We are already implementing some of the points but the whole
thing cannot be done in a week or a month," a Keidanren
spokeswoman quoted Habibie as saying.

The spokeswoman said Japanese business leaders pressed the
vice president to pursue all 50 points.

But Habibie, on the second day of a four-day visit here, said
a key difficulty would be the removal of a monopoly on trade of
agricultural products by the country's food agency, she said.

"But Habibie did not say Indonesia cannot implement all of the
provisions," she told reporters.

Japan's ruling Liberal Democratic Party policy chief Taku
Yamasaki on Wednesday quoted Habibie as saying when they met in
Jakarta last weekend, that Indonesia would be able to implement
only 48 of 50 IMF reforms.

The two provisions that Habibie said might be difficult for
Jakarta to implement concerned abolition of monopolies on spices
and on agricultural products other than rice.

The Keidanren official said Habibie stressed Indonesia wanted
to do whatever it can to stabilize the rupiah.

He told the business leaders one option might be a currency
basket using the yen, the dollar and the future euro.

He did not elaborate on the suggestion and said that to
implement it, Indonesia still needed a supervision system for its
troubled banking sector.

Japanese officials said that in a meeting with Finance
Minister Hikaru Matsunaga, Habibie showed a "positive" attitude
towards a new round of IMF talks to reach agreement on the
reforms.

"He (Habibie) said constructive debate has begun and called it
a good first step," the officials said.

They said Matsunaga and the other Japanese ministers had the
same message for Habibie -- which he seemed to accept -- that
Japan could give help only under IMF reform guidelines.

After meeting Trade Minister Mitsuo Horiuchi, Habibie told
reporters: "It was a very good discussion, very productive. We
are looking forward to increasing our cooperation so that within
the shortest time, the dynamic of our economy comes back."

In his meeting with Hashimoto, Habibie said he was instructed
by Indonesian President Soeharto to tell Hashimoto that Soeharto
was very satisfied with the weekend meeting between the two
leaders, officials said.

Habibie asked for some form of aid to his country's medium-
and small-sized firms, currently suffering from high inflation
and interest rates and a collapsed rupiah.

The officials said Habibie also raised the issue with
Horiuchi, who mentioned a two-step loan scheme already used in
Thailand, where financial aid from outside reaches firms through
an intermediary domestic channel.

Horiuchi said such a loan scheme would be one useful tool to
help medium-sized firms, but pointed out Indonesia currently
lacks such an intermediary channel.

Habibie told reporters there was no discussion of Indonesia as
a country rescheduling either its public or private debt.

"No, we are not going to reschedule," Habibie said.

He said there were talks to reschedule some private-sector
debt, but this was solely a matter for private lenders and
borrowers to deal with.

Habibie also met Agriculture Minister Yoshinobu Shimamura to
discuss possible Japanese food aid.

Shimamura said Japan was ready to offer "the appropriate
amount of food aid" to Indonesia based on findings by the Food
and Agriculture Organization (FAO) and the World Food Program
(WFP), a Japanese official said.

The official did not estimate a time frame in when Japan would
decide on the exact amount of rice aid to Indonesia.