RI deserves CGI support: IMF

RI deserves CGI support: IMF

Berni K. Moestafa, The Jakarta Post, Jakarta

The International Monetary Fund (IMF) promised a helping hand
in Indonesia's bid to secure some Rp 35.4 trillion (about US$3.7
billion) in new loans from the Consultative Group on Indonesia
(CGI), as the Fund said it would suggest donor countries lend
their support to Indonesia.

The IMF's senior resident representative in Jakarta, David C.
Nellor said on Tuesday Indonesia deserved support from the CGI.

Although not a member of the group -- which includes many
donors from industrialized countries, the World Bank and the
Asian Development Bank (ADB) -- the IMF would present its view on
the Indonesian economy before participants of the CGI meeting,
Nellor said.

"One of the elements (in the presentation) is the 2002 budget.
It requires external financing, and we will argue that it
deserves that support," he told reporters after a meeting with
Coordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti.

Nellor's statement came after the World Bank on Monday warned
of increasingly wary donor countries, annoyed by Indonesia's poor
track record in meeting reform targets.

The government hopes to secure some Rp 35.4 trillion in loans
from the CGI, that would help it finance the deficit in the 2002
state budget.

The deficit is estimated at Rp 42.1 trillion, which represents
about 2.5 percent of the country's gross domestic product (GDP).

External financing from the CGI is expected to cover most of
the gap, while domestic financing from privatization and asset
sales should cover the balance.

According to Nellor, support from CGI members does exist.

Earlier last month, a senior government official told local
newspapers that Japan was ready to pledge some US$1.4 billion,
the World Bank some US$1 billion and the ADB between US$600
million to US$1 billion.

But thus far, none of the lenders confirmed the amount they
would pledge during the CGI meeting.

The World Bank said the amount of its commitment depended on
how the government was planning to use the funds.

"Donors will be interested in hearing what the government's
plans are and how they propose to implement the various policies
they've announced," Nellor explained.

He was referring to, among other things, the 2002 state
budget, which the World Bank previously described as sound and
realistic.

"What people will be looking at is if there is a critical mass
of policies which will enable the economy to grow," Nellor said.

He said meeting the donor countries would also allow the
government to explain the challenges it faces in implementing
reform programs.

And there is no shortage of challenges confronting the
recently-installed government in its attempt to reform the
economy.

Privatization and asset sales targets, and the lack of action
so far, are weighing heavily on foreign investors' appetite for
Indonesian assets.

Chronic problems at home, ranging from anti-Western sentiment,
legal uncertainties, and political instability, have dampened
interest with regard to Indonesian companies.

Adding to this, is the accelerated downfall of the global
economy since the Sept. 11 terror strikes in the United States.

The entrance of foreign investors is vital to offset domestic
investment, which has been sharply down since the financial
crisis hit the country in 1997.

Investment from the private sector has become important, given
the government's limited ability to stimulate economic growth.

Massive debts cripple the budget's spending ability, forcing
the government to rely on private investors to drive the economy.

Indonesia's total debt stands at some US$137.6 billion as of
last August, of which US$74 billion is government debt.

Yet new loans from the CGI coupled with debt rescheduling
under the Paris Club agreement are necessary to lend next year's
budget some degree of stability.

For this year's budget, the significance of today's CGI
meeting is to build confidence, according to a former IMF senior
official.

Chairman of Deutsche Bank Asia, and former IMF Asia Pacific
Deputy Director, Hubert Neiss said foreign investors use the CGI
meeting to gauge Indonesia's reform progress.

"Private foreign investors still largely take a wait and see
position....they will come a bit later, now is the time for
official donors to support," Neiss told reporters in a press
conference to introduce Deutsche Bank's new chief country
officer, Suresh L. Narang.

A successful meeting of the CGI, he said, was bound to result
in a confidence boost among foreign investors.

Analysts said regaining confidence was vital if the government
hopes to succeed with its privatization and asset sales program
this year.

This success rests largely on pushing ahead with the sale of
PT Bank Central Asia (BCA) and cement company PT Semen Gresik.