Political stability a must for economic reform: Neiss

JAKARTA (JP): The International Monetary Fund's Asia-Pacific director Hubert Neiss began talks with Indonesia's new government yesterday on setting the stage for possible disbursement of delayed bailout funds.

Neiss, who arrived in the capital Tuesday evening, is planning to have week-long marathon talks with new President B.J. Habibie and economic ministers, as well as opposition leaders, foreign ambassadors and economic experts, to get their views on the recent political unrest in the country.

"The IMF is concerned about the economic side of the issue, but political stability is essential to make economic reforms successful," he told reporters yesterday following his meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

Earlier yesterday, he met with the World Bank Jakarta representative Dennis de Tray.

The country experienced its worst political unrest, including at least 500 deaths, in three decades in the middle of this month.

The riots led to the resignation of president Soeharto and the rise of his protege Habibie, who is now under pressure from opposition leaders to hold general elections forthwith.

The turmoil also caused the delay in the disbursement of US$1 billion in IMF bailout funds scheduled for June 4. The agency had earlier channeled $4 billion out of the $10 billion it had already committed as part of the $43 billion bailout fund to cope with Indonesia's economic crisis.

Neiss declined to go into detail about his talks with several economic ministers yesterday or how soon the funding might be released.

He said budget and banking issues were the main focus during his hour-long discussion with new Minister of Finance Bambang Subianto.

His organization would do its best to help lift the country out of its economic crisis, he said.

"The IMF will provide a lot of technical assistance to help the banking sector," he said following a meeting with Bank Indonesia Governor Sjahril Sabirin.

The country's banking sector is in danger of collapse following the rupiah's plunge to as low as Rp 17,000 to the U.S. dollar in January, compared to Rp 2,450 in July. The currency has been hovering around Rp 10,500 in the last couple of days, after plunging below Rp 15,000 when the political turmoil erupted.

The country's largest bank, Bank Central Asia, which is owned by tycoon Liem Sioe Liong and Soeharto's children, has been hit by a massive run on deposits for more than a week.

The run continued yesterday despite Sjahril's pledge to provide liquidity assistance to help the bank.

Neiss also met with the new Minister of Trade and Industry Rahardi Ramelan yesterday, in which the country's letter of credit conundrum was among the topics of discussion.

"I want to have his view regarding the trade issues," he said.

He was also briefed by State Minister for the Empowerment of State Enterprises Tanri Abeng on the country's privatization schedule.

Neiss is expected to pay a courtesy call on President Habibie this morning, and to meet with opposition leaders Amien Rais and Megawati Soekarnoputri later in the afternoon. (rei)