Sonny,latest news from Indonesis.Note section were it is noted that Suharto's family hodings in Indonesia are the major stumbling block.If
this bozo keeps putting his family ahead of the country I bet you they will take him out in a coup just like they did his predecessor Sukarto 20 years ago. ( More to follow )
TA
1/9/98
Clinton Envoy To Pressure Indonesia On Reforms Linked To Bailout
WASHINGTON -(Dow Jones)- Indonesia's beleaguered currency rebounded Friday
following reports that President Clinton is joining the International
Monetary Fund's senior management in a stepped-up effort to encourage
Indonesia to deepen and accelerate its economic reforms.
Clinton, after a series of consultations with aides and top economic
advisers, contacted Indonesian President Suharto to directly elaborate on
U.S. concerns regarding the longtime leader's commitment to the economic
reforms called for under the IMF's $43 billion rescue package.
In addition, Clinton is dispatching Deputy Treasury Secretary Lawrence
Summers to Jakarta as part of an effort by a high-level contingent of IMF
officials to accelerate the reforms that many analysts say appear to be in
danger of collapse and to underscore Washington's willingness to take an
active role in helping Indonesia as long as the nation meets its IMF
commitments. The IMF has warned that Jakarta is in danger of losing further
IMF loans if desired austerity measures aren't imposed. The worries over
Indonesia's willingness to undertake reforms accelerated this week when
Suharto unveiled a fiscal 1999 budget that called for a 32% increase in
spending. Critics also said the blueprint is based on wildly optimistic
economic assumptions.
News of Clinton's renewed focus on Indonesia sent the rupiah soaring 30%
Friday following its 26% plunge Thursday. The currency closed at 7,900
against the dollar, up sharply from Thursday's close of 10,225. Shares on the
Jakarta Stock Exchange index, meanwhile, closed down four points.
Despite the currency's rebound, Standard & Poor's lowered its long-term
foreign-currency rating for Indonesia to double-B from double-B-plus and its
local currency rating to triple-B from triple-B-plus. S&P placed it on
CreditWatch with negative implications.
The rating agency said that despite Friday's recovery, "the substantial
depreciation of the rupiah in recent weeks has intensified already severe
pressures on the private sector to a degree that threatens widespread
bankruptcies and a surge in unemployment."
Meanwhile, Moody's downgraded several Indonesian debt ratings, cutting the
foreign-currency country ceiling for bonds and notes to B2 from Ba1 and the
foreign-currency bank deposit ceiling below investment grade to Caa1 from
Ba3.
The rating agency said that the downgrades resulted from rising concerns
over the economic and financial consequences of continued turmoil and
volatility in Indonesian financial markets.
Because of the lowering of the debt and deposit ceilngs, Moody's also
downgraded the ratings of all 12 rated Indonesia banks.
Senior administration officials said Clinton, in a 20-minute telephone call
to Suharto, "underscored the importance of Indonesia to the region and to the
United States, and the president made it quite clear that the IMF program
needs to be followed."
Though Summers' mission to Jakarta technically will be separate from that
of the IMF, the presence of the Treasury's top international official at the
same time that ranking IMF officials are present is aimed at driving home the
message to Indonesian leaders that rapid and forceful action on economic
reforms is needed.
The U.S. has pledged $3 billion in credit to Indonesia as part of a $43
billion financial-bailout package led by a three-year, $10.1 billion IMF
standby credit that was approved in early November.
Disbursement of the U.S. credit, along with pledges from other nations,
still appears to be in question. But there are rumblings in Washington that
Clinton would be willing to accelerate the outlays if the Indonesian
leadership showed a stronger commitment to dismantling barriers to a more
open and vibrant economy. Relations and friends of Suharto, who has
controlled the world's fourth-most populous nation for 32 years, control many
of Indonesia's most lucrative businesses.
In one sign of possible encouragemnt to IMF officals, Suharto's son Bambang
Trihatmodjo said Friday that he would delay the construction of the nation's
first privately owned oil refinery until the nation's economic situation
improves. Based on Friday's rupiah close, the project is valued at about $1.4
billion. Bambang called on other businesses to follow suit and delay giant
projects.
The senior U.S. administration official indicated that accelarted aid would
be among the decisions that will follow Summers mission to Jakarta. As it
stands now, the U.S. credit remains as a second line of defense.
The U.S. is keenly interested in seeing Indonesia come to grips with its
current problems, and any potential social unrest that might stem from the
faltering economy. U.S. officials are worried about regional political
instability and the potential for social unrest in Indonesia - a nation seen
as a valued Asian ally to the U.S. - ahead of presidential elections in the
spring.
In addition, the declines in Indonesian markets are also serving to further
unsettle other Asian financial markets and raise the specter that the
contagion effect will cause the turmoil to spread through global financial
markets.
Clinton's contact with Suharto is particularly important given that the
Indonesian president's family banking, industrial and import interests are
said by the IMF and private analysts to be among the major stumbling blocks
to effective economic reform.
Details of the Clinton's conversation with Suharto weren't divulged, but
its is expected that Summers will depart for the Indonesian capital by
Saturday at the latest. IMF Deputy Managing Director Stanley Fischer is due
in Jakarta Sunday, while IMF Managing Director Michel Camdessus will arrive
around midweek.
S&P, meanwhile, also cut the debt ratings of 18 Indonesian companies and
lowered the long-term foreign currency ratings for two banks. S&P also
lowered its claims-paying ability rating and issuer credit rating on
government-owned general insurer P.T. Asuransi Jasa Indonesia (Jasindo).
London's credit rating agency Fitch IBCA cut its long-term rating for Bank
Dagang Nasional of Indonesia - a financial leader in Indonesia - to
double-B-minus from double-B-plus.meanwhile, follows the agency's lowering of
its long-term foreign currency rating for the Republic of Indonesia to
double-B-minus from double-B-plus.
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