Within days after his appointment as Indonesia's new chief economics minister in late August, Rizal Ramli acted firmly to proclaim his leadership of the government's new economic team. The International Monetary Fund acquiesced to Rizal's demand for amendments to the IMF-supervised economic reform and a new reform agreement bearing his signature because the introduced changes were only superficial and the core elements of the reform package remained intact.
However, when Rizal, in his capacity as chairman of the Financial Sector Policy Committee, approved last Monday more than US$3.7 billion in debt workouts for four business groups -- debt restructuring is supposed to be one of the vital elements of the economic reform program -- the IMF and the World Bank balked. What made Rizal's move seem even more controversial and suspect was that the decision on the debt deals was made only two days after he received a joint letter from the IMF and World Bank chief representatives in Jakarta urging a second, independent opinion on the deals before they were finally approved.
Rizal's biggest error seemed to be his apparent compromise of two fundamental principles of the reform: transparency and accountability, without which the whole reform program would be doomed to failure.
The debt deals threw Rizal into a tussle with the two multilateral agencies, until now still the most influential opinion leaders on Indonesia for international creditors and the international market. Most analysts also criticized the deals made with Tirtamas, Texmaco, Kiani Lestari and Banten Java Persada groups for their lack of transparency and for their allegedly being too much in favor of the debtors.
The bone of contention of the two agencies that is fully shared by most analysts is their argument that it is vital to have a level playing field for restructuring debts and a basic principle on which all the deals are based. A second opinion, they argued, could offer a new perspective on the deals as each debt restructuring could establish an important precedent and have lasting implications for taxpayer liability and the future role of the Indonesian Bank Restructuring Agency.
But what especially "burned" Rizal over the IMF and World Bank warning was that the joint letter, which was disclosed by Dow Jones, seemed to single out the deal with the Texmaco Group as an example to stress the point of their argument.
Rizal accused the two agencies of being discriminatory in their judgment, questioning their motive and asking why had they kept silent over worse debt deals reached previously, such as those with the Salim Group, which had ceded only Rp 20 trillion worth of assets to settle its more than Rp 52 trillion debt to the government.
However, the IMF and World Bank clarified in a another joint letter to Rizal on Saturday that the institutions were neither endorsing nor criticizing any particular asset restructuring proposal, pointing out they were not in a position to do so, nor would it be appropriate. The essence of the letter amplified the remark made by IMF chief representative in Jakarta John Dodsworth on Friday that it is not the fund's policy to comment on individual debt workouts.
Needless to say, the FSPC should act immediately to disclose the details of the debt deals, explaining all the facts that led it to the conclusion that the deals would be the best alternative for the economy and the people who will bear the risks.
A prolonged spat between the economic team and the IMF and the World Bank certainly would not bode well for the nation, especially in the run-up to the annual meeting of the country's creditors grouped in the Consultative Group on Indonesia in Tokyo next week, which will make a decision on the $4.8 billion in new loans asked for by the government.
As we argued in this column last week, if the debt workouts remain suspect, and unless they are accepted as viable by the House of Representatives and the market (the international financial community), they will not be effective in helping the debtors resume normal operations because new credit lines would likely remain closed to them. Only when the companies are restored to normal production will the government have a fair chance of recouping the huge amount of taxpayers' money already invested in their plants.