Soeharto pledges to restore economic trust

Soeharto pledges to restore economic trust

TOKYO (Reuters): Indonesian President Soeharto said he will make all-out efforts to restore trust in Indonesia's financial sector, a Japanese financial daily reported yesterday.

Soeharto said in an exclusive interview with the Nihon Keizai Shimbun that he will implement reform plans in line with the International Monetary Fund's aid package for the country.

He also said he expected Japan's private and public sectors to provide economic assistance for Indonesia, it reported. Japanese banks are the biggest lenders to the country.

Soeharto, running for a seventh term in Indonesia's March 10 election, said the dramatic fall in the rupiah against foreign currencies has destroyed many of the economic advances the country has made over the past 30 years, the paper reported.

He suggested curbing speculative foreign exchange trading, which he said was the main cause of Indonesia's crisis. He would like to see the World Trade Organization establish a world body to monitor forex trading, it said.

The Indonesian president said he wants to take the leading role for implementing IMF reforms and to review the dominant position of companies operated by his family in line with rebuilding the economy, it said.

It did not say when the interview was conducted.

Indonesia last week announced a temporary freeze on foreign debt servicing for distressed companies to allow time for new arrangements to be worked out between lenders and borrowers. It also announced major bank reforms.

Analysts have said most Indonesian companies have stopped servicing debt since the beginning of the year, when the rupiah plunged below 10,000 to the dollar from the level last July of 2,400. At one point recently it had lost 80 percent of its value before clawing back some ground.

Indonesia said it estimated some 228 companies in the country had debt servicing problems.

Approximately $66 billion of Indonesia's $140 billion in overseas debt consists of corporate debt, although not all of that amount will be affected by the servicing freeze.

Investors worldwide are closely watching how financial markets will respond this week to Indonesia's latest moves.

A key advisor to the Indonesian government on the country's mammoth corporate foreign debt said on Saturday he was confident that dramatic reforms of the economy would boost confidence and stabilize the currency.

"I am confident that the rupiah will be stabilized rapidly as confidence is bolstered by the decisive implementation of the comprehensive program of economic reforms announced on January 15 and the subsequent bank restructuring plan," Radius Prawiro said in a statement sent to Reuters.

"The strengthening of the rupiah to a level more closely in line with fundamentals will play a crucial role in alleviating the external debt burden of the corporations and restoring their financial viability," he said.

Radius, a former finance minister, released the statement late on Saturday before leaving on a trip to Japan for talks with Japanese banks.

The crisis, which has dramatically increased unemployment and seen the banking industry almost grind to a halt, forced Jakarta to accept a $43 billion IMF rescue package in October that is forecast to hit the nation of more than 200 million people hard this year.

Soeharto signed a new accord with the IMF in mid-January after the government was widely seen as backsliding on a previous reform agreement with the agency.

Authorities are concerned over the potential for increased unrest in coming weeks and months as prices continue to rise and subsidies on basic foods and fuel are removed in line with the economic reform agreement with the IMF.