Japan/IMF to address Indo problems this week.
From Yahoo - Business News biz.yahoo.com
(bolded for skimmers)
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Sunday January 25, 3:26 am Eastern Time
FOCUS-Debt mess hobbles Indonesia, Suharto unbowed
(Adds analysis, exodus of residents for Moslem holiday)
By Dean Yates
JAKARTA, Jan 25 (Reuters) - International investors will be looking for news this week on how Indonesia intends to tackle its foreign debt nightmare, which has roiled financial markets across Asia and unnerved Wall Street.
With President Suharto's administration apparently unsure how precisely to deal with the issue, it has been left to friendly nations and the IMF to reassure investors that Indonesia will take action on the debt mess.
The mountain of foreign debt stuck on company books -- estimated at $66 billion -- threatens to drive Indonesia's economy into the ground and toss countless people out of work across the archipelago.
A lack of decisive action on the crisis has triggered unprecedented criticism of the 76-year-old Suharto, but political analysts said on Sunday they expected the wily former army general to stay in office for the foreseeable future.
Suharto is assured of re-election for a seventh five-year term in March. In addition, the lack of an obvious successor and a belief among some Indonesians of social unrest if he suddenly steps down has played in his favour, analysts said.
On Sunday, Japanese Vice Finance Minister for International Affairs Eisuke Sakakibara said Tokyo and the International Monetary Fund would adopt unspecified measures to tackle Indonesia's financial quagmire this week.
''This week, in cooperation with the IMF, we will be taking some sort of measures (on the Indonesian crisis),'' Sakakibara said on a television programme.
While Sakakibara gave no specifics, the IMF has previously said it was working with the Indonesian government to devise a plan to untangle companies hobbled by foreign obligations.
Banking sources have also said the government and the IMF were looking at ways to deal with private sector debt, but officials have made little comment on the matter, apart from reiterating there would be no bail-out of indebted firms.
Suharto announced a fresh economic reform agreement with the IMF on January 15, which superseded an initial package agreed last October in return for a $43 billion bail-out. But the latest measures did not reveal a plan to solve the debt issue.
Indonesia's total external obligations stand at $140 billion and analysts have said foreign corporate debt was virtually impossible to pay off, given the plunge of the rupiah currency by some 80 percent against the dollar since July.
The fragile rupiah ended in Jakarta on Friday at 13,000/13,500 after falling to a day's low of 15,000. On Thursday it sank to a historic low of 17,000.
Analysts said Indonesia's battered financial markets should get time to lick their wounds this week as the nation winds down for a long Moslem holiday.
But they added any respite would be brief unless the government addressed the bad debt problem and took the lead in promoting banking sector reform.
Plans to solve Indonesia's debt crisis by issuing government bonds have been debated by a committee from the Asia Pacific Economic Cooperation (APEC) forum and, according to a newspaper report, U.S. investment bank Morgan Stanley.
But what has concerned investors and financial analysts has been a lack of leadership in Jakarta over the issue.
''It's a nightmare. I think it would be helpful if the Indonesian government gave some leadership, some guidance,'' Bill Belchere, head of fixed income and economic research at Merrill Lynch in Singapore, said late last week.
Some analysts have said social fallout from the crisis could emerge as millions of Indonesians return to their home villages for the Moslem Eid al-Fitr festival, which marks the end of the Ramadan fasting month.
A number of companies have been unable to pay a traditional one-month bonus ahead of the holiday, which falls on January 30-31, but there have no reports of any incidents or unrest.
Over the weekend, thousands of residents poured out of Jakarta on buses and trains.
Indonesia's plunge into financial disaster has also cast the spotlight on politics.
While Suharto is assured of re-election despite criticism of his handling of Indonesia's economic predicament, he has yet to address the vital issue of who will succeed him.
Political analysts have said jockeying for the vice-presidential ticket was in full swing among a host of candidates, including the big-spending Research and Technology Minister Jusuf Habibie.
Whoever becomes Suharto's running mate would take over if the president, who has been plagued by ill health recently, became incapacitated.
Suharto said on Tuesday he was ready for another term despite questions about his age and health, as well as his leadership capabilities in the current crisis. Key political parties have said they backed his candidature.
Even though his reputation has been stained and his ability to handle the economic crisis questioned, political analysts said he would hang on.
''It's true the (financial) markets don't like him and there are any number of people wanting to step into his shoes, but not one of them can convincingly carry it off,'' said one diplomat.
World leaders have also rallied in support of Suharto, whose firm rule lifted Indonesia out of dire poverty in the 1960s and into the ranks of Asia's booming tiger economies.
But they have also urged him to act decisively to control a crisis that threatens to spill into the streets as soaring prices bite and millions of workers lose their jobs.
Australian Foreign Minister Alexander Downer was due to arrive in Jakarta on Sunday night and was expected to express support for Indonesia's efforts to implement IMF recovery measures.
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JD |
