Protection from the IMF

Jergen Kaiser writes in The Jakarta Post on Aug. 6 about the need for another way when a country finds itself in a debt trap. Rather than being thrown into the hands of its creditors, there should be some neutral third party to arbitrate a solution.

I support this concept, however Kaiser's article only portrays half the story, or rather half the solution. As with chapter 11 bankruptcy in the United States, when a private company files with a court for protection from its creditors, a competent third party is appointed by the court to administer the company.

The administrator not only renegotiates the company's loans with its creditors, but also restructures the company and attempts to rid it of the bad management and bad practices that led to the crisis in the first place.

If Indonesia wants protection from its creditors it first has to admit that it has failed to put its own house in order. Then second, it has to be willing to let somebody else do the job for them. This is not as crazy as it may sound, and there is a precedent of sorts, when previously the Indonesian government in effect subcontracted out a large part of the functions of its customs department to the Swiss-based Sucofindo.

How can a country come complaining to its creditors about the debt burden on its budget when 30 percent to 50 percent of the money it does have is stolen or abused by greedy bureaucrats and politicians, when city or regional councillors waste limited resources on junkets, traveling to Europe or wherever on endless "comparative studies", or allocate gifts of Rp 250,000,000 each to provincial legislators? In circumstances such as these it is simply too easy to just request a debt rollover when it's your children who are going to have to foot the bill.

Indonesia is not a poor country but it is being impoverished not by the IMF, but by those very same bureaucrats and politicians, and by the bankers who stacked their Singapore and Swiss bank accounts with liquidity support funds and by a government which does nothing about it.

A solution is definitely needed to the heavy debt burden faced by Indonesia, but one that is a balanced solution. One that includes strenuous efforts to recover stolen assets and prosecute the offenders.

Incidentally, I might have missed something, but why does Indonesia need IMF money in the first place when it has about US$29 billion in reserves of its own? Australia has been getting along just fine for years with half as much.

DAVID SINCLAIR

Bantul, Yogyakarta