Singapore's $10 billion aid to Jakarta may have strings

Singapore's $10 billion aid to Jakarta may have strings

By Doreen Siow

SINGAPORE (Reuters): Singapore should benefit from helping
Indonesia to beat its financial crisis, but it is unlikely to
give money without conditions, economists and analysts in
Singapore said yesterday.

Singapore has not said how much money will be forthcoming for
its giant neighbor and major trading partner, even though
Indonesian President Soeharto said on Tuesday it had agreed to
extend US$10 billion in soft loans.

"Prime Minister Goh Chok Tong and President Soeharto agreed in
Jakarta on Oct. 21 that Singapore would help to supplement the
IMF effort to restore confidence in the Indonesian economy, the
Singapore Foreign Ministry said late on Tuesday.

Ministers from the two countries were to meet soon to work out
the details, it said. Singapore has said nothing since.

Several analysts told Reuters they expected the Singapore aid
would be given within a larger framework with conditions
attached, some of which would never be revealed.

"It is very unlikely the money will be given without
conditions," said Bill Belchere, head of fixed income and
economic research at Merrill Lynch.

"Can you imagine the Singapore government just saying 'Here is
$10 billion'? I am pretty certain there will be conditions, but
some may never be made known," said Christopher Chong, head of
HSBC James Capel Securities.

Chong said even if the money was not given under the umbrella
of the International Monetary Fund (IMF), which is negotiating an
aid package for Jakarta, it would be under an arrangement with
other organizations like the World Bank or the Asian Development
Bank.

"A healthy Indonesia is good for Singapore. There is so much
of Singapore business that would be affected by instability in
Indonesian," he said.

Analysts said it was hard to guess the extent of Singapore
investments and trade with Indonesia as Singapore does not
release such figures on a regular basis.

But at the official opening of a Singapore Trade Development
(TDB) office in Jakarta two months ago, the TDB revealed that
Singapore was Indonesia's third largest trading partner and
foreign investor.

A TDB officer said Jakarta figures showed imports from
Indonesia hit a record $4.6 billion in 1996, while exports to
Indonesia were $2.9 billion. Direct Singapore investments in
Indonesia that year were $3.13 billion.

Despite its extensive interests in Indonesia, it seemed
unlikely Singapore would give aid independent of the IMF,
Belchere sid.

"I can't imagine Singapore would give money to Indonesia
outside the IMF package. I think it would at best be a supplement
to the IMF package to help them with the balance of payments,
financial sector adjustments exercise," he said.

Belchere said he expected the IMF to put money into Indonesia
as well as manage disbursement of other money coming into the
system, as it did in Thailand, for which it put together a $17.2
billion rescue package in August.

"You will have IMF money involved, you would have Japanese
money, maybe Singaporean, Australian and Malaysian money. And
that would be conditional upon them meeting performance targets
and making adjustments, particularly in the finance sector," he
said.

Economists and analysts said while $10 billion was a lot of
money, it should not strain Singapore's foreign reserves, which
official figures put at S$117.6 billion (US$74 billion).

Lim Chung Chun, an analyst with ING Baring Securities, said
the $10 billion was less than Singapore's 1996 current account
surplus of about $14 billion. ING Barings expected Singapore to
have a similar surplus in 1997, he said.

"Whether it is $5 billion or $10 billion, it is a serious
amount of money and a serious commitment of confidence in
Indonesia," Belchere said.