Indonesia, IMF reach agreement on economic-reform measures
THE WALL STREET JOURNAL
JAKARTA, Indonesia - The Indonesian government Wednesday announced a revised reform package designed to pull the world's fourth most-populous nation out of its worst economic crisis in 30 years.
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Private-sector debt is a key element in the revised IMF program. Indonesia's top economic minister said a plan based on the Mexican "Ficorca" model would be put in place.
GINANDJAR KARTASASMITA, Indonesia's top economic minister, said talks with the International Monetary Fund on how to restart a $43 billion rescue plan ended Wednesday morning with a new agreement.
Mr. Ginandjar said he would sign a new letter of intent either later Wednesday or Thursday. He added that copies of the letter would be available to the public after the letter is presented to the IMF's board.
"It's important to stress that President Suharto strongly instructed this cabinet to implement the program to the letter," he said at a press conference.
Mr. Ginandjar said the new deal tackled an array of financial problems, including ways of overcoming the nation's $70 billion private-sector debt. Talks on that issue with at least 13 international banks are scheduled to start April 15 in New York.
Private-sector debt is a key element in the revised IMF program. Mr. Ginandjar said a plan based on the Mexican "Ficorca" model would be put in place in Indonesia.
Mr. Ginandjar stressed that while the government would play an active role in resolving the debt problem, it would not institute a bailout.
"It's necessary for the government to get involved in the matter but there's no bailout from the government for the corporate debt," the economic minister said.
"The commercial risk should be shouldered by creditors, while any risk transferred to the government should be kept at manageable levels," he said.
When local companies repay their foreign lenders, Bank Indonesia, the nation's central bank, will guarantee the availability of funds, as was the case in Mexico, the minister said. The government would agree to accept the foreign-exchange risk if the rupiah depreciates further, Mr. Ginandjar said.
Mr. Ginandjar also said he hoped foreign banks would agree to roll over their loans by three to four years as well as shoulder part of the debt burden. "In this case, not only must the government provide something, but so must the creditors," he said.
In order to assist this process, the economic minister said Indonesia is in the process of revising its bankruptcy laws, though he added that a transitional law must be set in place soon by the minister of justice.
The new agreement focused on five areas: monetary policy, banking-sector reform, the budget and subsidies, structural reform and private-sector debt.
Indonesia's government had at first balked at taking the medicine that the IMF prescribed as a condition of releasing its $43 billion rescue package. The bailout was made necessary when the debt-burdened Indonesian economy suffered amid a plunge in the country's currency, the rupiah, in the past year.
The bailout was first cobbled together last October, but was revised in January when the economy deteriorated. It broke down again in February when the IMF complained that Indonesian President Suharto had failed to reform an economy dominated by his wealthy family and associates.
The IMF has delayed disbursing aid as it reviews the government's compliance with economic-reform measures it agreed to as part of the rescue package.
"We're following through on all of the commitments," Mr. Ginandjar said.
In a major concession, the IMF has indicated it will allow the government to delay removing subsidies for food and fuel, a key concern in this nation of 205 million people. Indonesian officials have also shown a new willingness to push ahead with reform.
He added that the new deal will help poor people by granting credits with lower interest rates to cooperatives. He said the government would maintain subsidies on rice and soybeans.
Earlier this year, Suharto argued that the IMF measures had failed to solve Indonesia's problems. He said the austerity measures had only inflicted misery on millions of struggling Indonesians and raised the potential for civil unrest.
The rupiah has fallen about 70% in value since the region's financial crisis, which began in Thailand, hit Indonesia last July, bringing high inflation, company closures and unemployment.
In February, deadly riots broke out over rising prices, costing five people their lives. Student protests also have mounted.
Relations between Indonesia and the IMF deteriorated to the point last month where the lending agency withheld a $3 billion loan installment, pending the outcome of the latest negotiations.
The installment is expected to be released within three weeks of the announcement of a new deal.
In a move that drew IMF praise, Indonesia announced this past weekend that it had frozen the operations of seven insolvent banks, some with connections to Suharto's family.
Another seven banks with major problems will stay in business under the management of a government-appointed restructuring agency.
Indonesia is expected to face a long period of painful recovery. The economy is expected to shrink by 5% this year. At the same time, inflation is predicted to rise to 47%.
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I saw some other reforms similar to the USA 1930's New Deal programme
Indonesian government has guaranteed depositors money with heavily leaverage banks. Is basically bailing out debt ridden banks, forcing bank consodilations, ensuring economic financial stability, confidence etc.
Indonesia to float seven state firms in 1998/99(RP
JAKARTA, April 8 (Reuters) - Indonesia said on Wednesday the government planned to divest its holdings in five listed firms and float seven state-owned companies in the 1998/1999 fiscal year.
''Apart from the divestment (of government holdings) in those firms that are already listed, there will also be a further seven state-owned firms listed,'' Minister for State-Owned Companies Tanri Abeng told a news conference.
Abeng did not give any further details.
Listed state-owned firms include bank BNI (BBNI.JK), cement firm Semen Gresik (SMGR.JK), telecommunications firms Telkom (TLKM.JK) and Indosat (ISAT.JK) as well as miners Aneka Tambang (ANTM.JK) and Tambang Timah (TINS.JK).
This will will be my last post. My free month is up
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