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.