WB, ADB delay aid to Indonesia, Japan goes ahead

WB, ADB delay aid to Indonesia, Japan goes ahead

TOKYO (Agencies): The World Bank will delay a one-billion-
dollar loan and the Asian Development Bank its US$1.5 billion aid
to Indonesia until the country makes clear reform efforts,
senior bank officials said in Tokyo and Manila yesterday on the
day President Soeharto was reappointed to power.

The loan will only go ahead when Indonesia meets the reform
criteria laid down by the International Monetary Fund as part of
its bailout package, said Mark Malloch Brown, vice president of
the World Bank's external affairs department.

The delayed structural adjustment loan is the first tranche of
$2 billion from the World Bank to be offered this year. The bank
is still drawing up plans for an additional $500 million in food
and drug aid.

"The funds which are part of the IMF package are tied to the
IMF package remaining on track and so the structural adjustment
loan we have been working on for Indonesia is delayed," Brown
told a news conference here.

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 $3 billion -- to
help restore stability and confidence to the Indonesian economy.

"While we can be cautiously optimistic about the progress made
by the rest of the region, still much hangs by the thread of
successful stabilization in Indonesia and there obviously the
signals are very, very mixed," Brown said.

"At this point the crisis is more political than economic in
character," he added.

"President Soeharto is one of the great political survivors of
this region, or any region. Any statesman who is consumed by
making sure the achievement of 32 years is not washed away in bad
mistakes over a few months is always going to be open to making
the right decisions and getting reform back on track," he said.

The Asian Development Bank (ADB) also said in Manila that it
was delaying the disbursement of a $1.5-billion loan to fund
financial reforms in Indonesia amid Jakarta's stand-off with the
IMF.

The ADB loan, for a financial governance reform program, was
intended to support the standby arrangement between the IMF and
Indonesia.

Japan

However, officials in Tokyo said yesterday Japan has no plans
to delay its bilateral aid (development assistance) program for
Indonesia but may be forced to do so if the global financial
community joins the IMF in postponing rescue payments.

Foreign Minister Keizo Obuchi said Tokyo had no plans to
suspend its multi-million-dollar aid program for Jakarta, which
is separate from the IMF rescue program.

Japan will disburse its 20 billion yen ($157 million) loan to
Indonesia in line with a schedule for World Bank and Asian
Development Bank (ADB) loans, a senior Foreign Ministry official
said yesterday.

"The loan, aimed at alleviating the pain of Indonesia's
structural adjustment efforts, has been set to be disbursed along
with the lending by the World Bank and the ADB," the official
said.

But senior officials said the aid from Japan, known as
official development assistance, could be threatened if the World
Bank and Asian Development Bank (ADB) joined the IMF in
postponing rescue package disbursements.

"We have to keep in step with international monetary
institutions," a Japanese foreign ministry official said.

"If other international institutions like World Bank and the
ADB act in concert with the IMF, we will have to follow suit,"
the official said.

Vice foreign minister Shunji Yanai also told a news conference
on Monday: "We need to consider the reform agreement between the
IMF and Indonesia when we proceed with assistance."

"Japan may find it difficult to provide assistance," if
Indonesia fails to commit itself to the reform program, Vice
International Trade and Industry Minister, Osamu Watanabe, told a
news conference on the same day.

U.S. pressures

Meanwhile, the United States on Monday kept up the pressure on
Indonesia, insisting that Jakarta had to prove that it was
committed to IMF economic reforms.

"We believe that the government of Indonesia needs to
demonstrate through its actions and through the work of its
leadership that it remains fully committed to the IMF program,
that it understands the importance of promulgating and moving
forward with the economic reform measures that have been a
condition for IMF assistance," said White House spokesman Michael
McCurry.

"And we think there is considerable work to do and we will
continue to urge the government to do that work," he said.
U.S. officials have repeatedly urged President Soeharto to set
aside plans to establish a special board to manage a peg between
the local currency, the rupiah, and the dollar and to concentrate
instead on complying with IMF reform measures.