Testing the water

Testing the water

President Megawati Soekarnoputri hosted a special breakfast
meeting with American business leaders in New York on Monday, as
part of her itinerary during a visit to the U.S. to address the
UN General Assembly, to brief it on the latest developments in
Indonesia's overall situation.

She informed the businesspeople of the progress Indonesia had
made thus far in managing its economic crisis and in treading the
path of its transition to a decentralized, democratic government.
She also told them frankly about a host of problems that had yet
to be resolved to render the overall atmosphere more conducive to
investment.

On the same day, chief economics minister Dorodjatun Kuntjoro-
Jakti met with Malaysian businesspeople in Kuala Lumpur, also to
discuss the prospects of investment in Indonesia now that the
macroeconomic situation and political stability and security have
been strengthening.

Earlier on Monday an Indonesian delegation, led by Minister of
Finance Boediono and Bank Indonesia Governor Burhanuddin
Abdullah, hosted a special session with around 30 international
investors in Dubai on the sidelines of the annual joint meetings
of the World Bank and International Monetary Fund (IMF).

They briefed the investors on what measures the government had
taken and would take to fuel a stronger economic recovery and on
the government's plan to reenter the international financial
market next year with the issuance of bonds. Burhanuddin and a
government team proceeded to New York and London with a similar
mission.

These overseas missions should have been prompted by stronger
confidence on the part of the government, brought about by the
significant progress made in the economic, political and security
fields over the past two years.

Buoyed by improved macroeconomic and political stability, the
government seemed to feel that now was the right time to embark
on a campaign to inform the international market of the latest
situation. It is now high time to test market sentiment, sounding
out investors' views on Indonesia.

Termination of the IMF program later this year made it
essential for the government to assure the international market
on its economic management after the end of the direct IMF
oversight, and what would be the fate of the reform program.

It was indeed quite opportune that the information campaign
and overseas business missions were made immediately after the
launching of the government White Paper on the reform agenda the
government will implement next year, after the IMF program has
ended.

International creditors and investors, who had been worried
about the post-IMF continuation of economic reform measures, had
eagerly awaited the new reform agenda.

Even though some critics have attacked the new reform
framework as being deficient in bold, innovative measures, it is
still, at least on paper, quite credible as a new policy anchor
on which international creditors and investors can base their
perception of Indonesia's economic outlook.

Direct communication between Indonesia's policy- and decision-
makers and international market players in general has become
ever more imperative now that Indonesia will have general
elections in 2004, with a new government to take over later next
year.

International creditors and investors not only want to know
about developments likely until next year but are also greatly
interested in a benchmark to assist them to make a reasonable
calculation of the business and investment risks that would be
inherent in Indonesia under a new government.

This was the function of the direct communications that
transpired during the meetings in New York, Kuala Lumpur and
Dubai, especially when the dialog was candid, as in the meeting
President Megawati had with American businesspeople.

International creditors and investors are fully aware of the
complexity of the problems Indonesia has been encountering since
1998. They are rational enough not to expect immediate progress
in all sectors. What they wish to see is simply small, but
steady, progress in the direction of reform.

Direct communication through business meetings is one way of
assuring the international market (creditors and investors) of
what the future outlook of the Indonesian economy might be. Yet,
the best indication remains the quality and pace of
implementation of what is promised in the White Paper.