RI needs $2.4b to $2.8b more loans from CGI: WB

RI needs $2.4b to $2.8b more loans from CGI: WB

Dadan Wijaksana, The Jakarta Post, Jakarta

The World Bank said on Thursday Indonesia would need to obtain
between US$2.4 billion to $2.8 billion in fresh loans from the
Consultative Group on Indonesia (CGI) donors to help finance the
2003 state budget deficit.

Andrew Steer, the bank's country director for Indonesia, told
a press briefing that the figure, albeit higher than it was first
proposed by the government, would still be the lowest since the
economic crisis hit the country in 1998.

"This (the declining trend) implies nothing but good news, as
it means that the country becomes less dependent on foreign
financing needs," Steer said when unveiling the bank's report on
the country's economic assessment for the upcoming CGI meeting.

As a comparison, CGI last year pledged financial support
totaling $3.14 billion in loans and $568 million in grants and
technical aid.

The World Bank will be a co-host with the government at the
CGI meeting which would take place on Jan. 21-22 in Bali.

CGI is a grouping of the country's largest foreign lenders.

The 2003 budget deficit was initially projected at Rp 26.3
trillion (about $3 billion), but the forecast is widened to Rp
34.4 trillion after the Oct. 12 Bali bombing incident prompted
the government to provide about Rp 10.6 trillion worth of fiscal
stimulus to help cushion the impact.

The government will ask the CGI to help plug this deficit,
while the remainder would come from domestic sources, including
the use of some of the proceeds from the privatization program
and sales of assets under the Indonesian Bank Restructuring
Agency (IBRA).

In its report, the World Bank painted a positive picture in
its economic assessment on the country, saying that despite some
discouraging signs in its trade policies, Indonesia had made
significant progress with some economic reforms.

"Structural reforms have remained on track. It accelerated
after the Bali bombing, where the government renewed its efforts
on a wide front," it said.

The progress was reflected in further sales of assets and a
bank under the supervision of IBRA, further privatization of
state companies and the passage of the Law on an Anti-Corruption
Commission.

While IBRA's assets sales continued, the government managed
also recently to sell a majority stake in recapitalized Bank
Niaga, and a 42 percent stake in state-owned telecommunications
firm PT Indosat.

As an important member of the CGI, the Bank's assessment would
prove crucial for other members to determine whether to give
their vote of confidence on the country.

However, despite the progress, there were also worrying signs
with regard to certain government policies, especially in the
trade sector, which recently saw the application of new,
protectionist tariff and non-tariff measures on certain
commodities including sugar, clothes and textile.

The World Bank said that as such provided signals that the
government moved to a protectionist stance, which run against the
interests of many creditor nations.

Particularly worrying was a plan to increase the import tariff
on rice, a measure that would hurt the poor, it added.

In another part of the report, it also noted that the
government should maintain the macroeconomic stability while also
pursuing reform actions that could accelerate growth, create jobs
and reduce poverty, such as improving the domestic investment
climate and legal reform.

"A weak investment climate and legal system are holding back
economic growth," Steer said.

Concrete steps that the government could take to improve the
investment climate are cut short the long and cumbersome
bureaucracy, balancing labor regulations for the benefit of both
employee and employers and clarifying the confusing
decentralization program (autonomy law).