RI economy displays resilience, says WB

RI economy displays resilience, says WB

WASHINGTON (AFP): Events in East Timor and the Bank Bali
scandal threaten to derail Indonesia's fragile economic recovery
but it has not yet been knocked completely off track, the World
Bank said Thursday.

"The sudden upsurge in violence in East Timor and the
disturbing implications of the Bank Bali affair have shaken
market confidence," the Bank said in a quarterly review of East
Asia.

"These developments have interrupted, and may even derail, an
otherwise steady march toward economic stabilization," the report
said.

But Jean-Michel Severino, the World Bank's vice-president for
East Asia and the Pacific, said the gains had not yet been
reversed, noting that the Indonesian economy had attained two
quarters of positive economic growth this year "despite the
political events."

The growth this year could partly be ascribed to the fact that
the economy had fallen so far it had to bottom out at some time,
but "what impresses us quite a lot is that this (growth) has
taken place despite the political events," Severino said.

The economy had shown great resilience and capacity to rebound
and "a lot of investors, both domestic and international, are
waiting to jump and come back as soon as the political situation
stabilizes," Severino said.

Investors remember the "tremendous" growth record of previous
years and "are ready to try again."

In its World Economic Outlook report released on Wednesday the
IMF forecast the Indonesian economy would shrink 0.8 percent this
year and return to positive growth of 2.6 percent next year,
after shrinking 13.7 percent in 1998.

But Severino said that "what is absolutely key right now" for
the economic turnaround to continue "is a good clean electoral
process" in presidential elections in November.

International Monetary Fund managing director Michel Camdessus
said earlier Thursday that a resumption of IMF aid to Indonesia
depended on developments in East Timor and resolution of the Bank
Bali scandal.

Camdessus said he hoped that with the arrival of a
multinational peacekeeping force in East Timor that a "more
acceptable situation will progressively be established."

But he said it would not make sense for the IMF to resume aid
until bilateral donors did so, as IMF aid only worked as part of
a concerted effort.

Camdessus also said there would be no resumption of IMF funds
until the scandal surrounding Bank Bali is resolved.

"We have asked for the investigations to be speeded up and the
results of the investigation to be published" before funds can
resume, Camdessus said.

The scandal centers on the payment of an 80-million-dollar
commission by the bank to a company owned by a ruling Golkar
party executive.

The bank paid the commission to recover money owed by three
banks which had been closed down.