RI to negotiate with IMF and U.S.

JAKARTA (JP): Indonesia will send a technical team to the International Monetary Fund (IMF) headquarters in Washington next week to secure the continuation of the Fund's bailout program, a senior official has said.

Fuad Bawazier, deputy secretary-general of the President's Economic and Monetary Resilience Council, said yesterday that the top-level team would negotiate with the IMF and the United States government to break the current stalemate on the IMF bailout program.

"The negotiations are important so that the consultation (between the government and the IMF) will not be terminated," added Fuad who is also the director general of taxation.

The council's secretary-general Widjojo Nitisastro is expected to lead the team.

The IMF sent shockwaves through the Indonesian financial community on Friday with an announcement that its review of Jakarta's compliance with an IMF reform program could not be completed by March 15 as planned.

The review is necessary for the release of a second installment of IMF financial assistance -- worth three billion dollars -- to help restore stability and confidence to the Indonesian economy.

In Washington, the head of the IMF on Monday warned that lingering instability in Indonesia could undermine international efforts to contain the financial crisis in Southeast Asia.

Michel Camdessus, managing director of the International Monetary Fund, also told a seminar that Indonesia still had a "long list" of structural measures to implement and could not expect a fresh injection of rescue money before April.

While Thailand and South Korea had "turned the corner" in their efforts to overcome financial unrest, "we are not yet there by far in Indonesia," he was quoted by AFP as saying.

But he warned: "We still believe that if this problem (in Indonesia) is not resolved, the whole thing is at risk."

"A long list of structural measures, which had to be taken before this review is concluded, had not been taken," Camdessus said.

"It will certainly take until April before we are ready to have our executive board make a decision on the support we would like to extend to this country if, of course, the country continues applying this good program."

The IMF pledged $10 billion to a 43-billion-dollar rescue effort for Indonesia, to which the World Bank, the Asian Development Bank and individual countries are also contributing.

Indonesia to date has received $3 billion from the IMF pledge.

Camdessus complained that a proposal by Indonesian authorities to create a currency board to manage a peg between the rupiah and the dollar, which he described as "surrealistic," had "distracted attention" from the need to implement structural reform.

The reforms, agreed to by President Soeharto in exchange for financial assistance, call for a reduction in subsidies, financial sector reform and the abolition of politically-driven monopolies.

Camdessus stressed that the IMF considered the stakes to be high in Indonesia, where anti-government demonstrations have erupted throughout the country in recent weeks.

"Particularly in view of the very high risk of human suffering, the risk of ethnic strife and all the problems which are looming there, we want to do everything possible to help this country," he said.

In Kuala Lumpur, Malaysian Deputy Prime Minister Anwar Ibrahim was quoted by Reuters as saying yesterday he had asked the International Monetary Fund to speed up the disbursement of a rescue loan to neighboring Indonesia.

"Yesterday I have faxed an urgent message to IMF urging them to take into consideration the problems and complexities in Indonesia, and the contagion effect on the region," Anwar told reporters.

In a related development, Australia intensified efforts yesterday to persuade the IMF to moderate conditions it has imposed on Indonesia amid fears they could plunge the country into deeper social unrest.

"The requirements are just too tight in terms of their potential to cause civil unrest -- the winding back of fuel subsidies, the very tight budgetary outcome standards being set," deputy opposition leader Gareth Evans said in Sydney.

Former Reserve Bank governor Bernie Fraser warned that the IMF bailout lacked sensitivity and should have been tailored to suit Indonesia's needs rather than modeled on similar packages for other countries.

He said it was naive to rely on the markets to bring stability to the Indonesian currency and suggested that some kind of dual currency controls might be an appropriate response rather than a single currency board.

Treasurer Peter Costello said Australia believed Indonesia's best chance of stabilizing its economy was by implementing the IMF program.

"We've also made it clear that the IMF has to stay engaged in Indonesia and the program has to be implemented with a view to the situation of the public and the population at large," Costello said. (rid)