[stop-imf] Indonesia: IMF Aiding Gus Dur's Downfall? (fwd)

[Robert Weissman]

New Straits Times (Malaysia)
July 19, 2001

IMF aiding Gus Dur's downfall?

By Abdul Razak Ahmad in Jakarta

   One man's silence speaks louder than the screaming voices populating
Indonesia's current political turmoil. The man in question is Anoop Singh,
the International Monetary Fund's deputy director for Asia Pacific.

   Anoop and the IMF are accused of withholding loans to Indonesia to
hasten the departure of President Abdurrahman Wahid. Anoop was in Jakarta
last week to finalise a lending agreement between the IMF and the
Government.

   The agreement would release US$400 million (RM1.52 billion) in loans to
Indonesia, delayed since December last year.

   Before the visit, Anoop had indicated that a Letter of Intent (LoI)
releasing the funds would be signed by July 13.

   Anticipation was high. A signed LoI would help boost confidence in the
floundering economy.

   Anoop arrived, and the Press scrambled to get his comments. But the
economist inexplicably clammed up, refusing to utter a word about whether
the LoI would be ready for signing. He left Jakarta without an inked
agreement, but with the nickname Mr No Comment.

   The LoI, which is still in draft stage, would only be ready for signing
in September at the earliest.

   The unexplained delay fuelled speculation that the IMF was stalling, in
anticipation that President Abdurrahman Wahid would be impeached early
next month.

   Pro-Abdurrahman lawmakers said this was tantamount to a show of support
for the President's likely successor, Megawati Sukarnoputri, an act of
political interference. Such accusations against the IMF are not new.

   "The IMF is aware of these views and knows it is suspected of helping
to bring down Presidents Suharto and Habibie by cutting off loans at key
moments," read a report by the influential think-thank International
Crisis Group (ICG).

   The accusations come amidst mounting anger towards the IMF for its
ineffectiveness in helping Indonesia overcome its economic woes, despite
harsh reform packages that the country has had to undertake.

   A DPR member from the Reformasi fraction, Rizal Djalil, views the IMF's
involvement as excessive.

   "I would like to urge the IMF not to get too involved in matters
pertaining to the sovereignty of the country."

   Then again, Indonesia is hardly in a position to dictate terms to the
IMF.

   As a result of the 1997 Asian economic downturn, Indonesia turned to
the Fund to help deal with its battered economy.

   Indonesia currently has a debt of US$264 billion.

   The Government owes US$74 billion to external creditors, notably the
IMF, World Bank, Asian Development bank, and foreign governments.

   State-owned companies have another US$10 billion in foreign debts.

    The Government owes an additional US$70 billion to internal lenders,
in the form of State bonds issued to save domestic banks.

   Indonesian private companies have another US$110 billion in debt.

   The biggest concern is that such huge borrowings may paralyse the
Government, as an inordinately large amount of funds are required to
service the debt.

   These funds could have otherwise been channelled to address other
equally pressing concerns, such as alleviating mass poverty.

   The country's 2001 draft Budget reportedly set aside a whopping 52 per
cent of total state spending for debt service. In comparison, only seven
per cent was allocated for health and education, combined.

   When Indonesia turned to the IMF in 1997, the main strategy was to
formulate measures and policies to reduce the debt.

   Through a series of LoI, Indonesia agreed to renegotiate debt repayment
schedules, cut subsidies, increase tax revenues, sell off burdensome
government-owned commercial assets, and undertake banking reforms.

   Soon after came the most controversial IMF miss-step, which has led to
the loudest criticism.

   That year, the IMF, in a highly ambitious reform plan, insisted that the
Government close 16 floundering banks. The closures backfired, causing
panic as depositors fled.

   Speaking to legislators in Jakarta last week, Indonesia's Finance
Minister Rizal Ramli related how the closures caused a capital flight of
US$6 billion.

   "If preparations had been made before the banks were closed, the cost
would have only been US$900 million," he said.

   Rizal's criticism was supported by leaked IMF documents, published in
local newspapers recently, in which the Fund admitted that it was
"confused" over the bank liquidations.

   Despite the admission, Indonesia seems doomed to be stuck with the
dictates of the IMF, which has suspended loans to the country four times
since 1997.

   The outlook, according to the ICG report, is pessimistic.

   "There are signs that the IMF and some of its major shareholders,
notably the United States, have become increasingly frustrated with the
progress of reform in Indonesia.

   "It seems likely, therefore, that the IMF will continue to withhold
loans rather than compromise on issues which it considers central to its
programme."

   The delays could well be coincidental and have nothing to do with
political interference. Paskah Suzeta, a Lower House or DPR member from
Golkar, explains.

   "When Ministers are replaced weekly and official positions on economic
matters change every other day, which creditor would want to lend?"

   Furthermore, US$400 million is at best a mere drop in the ocean of funds
needed to put out Indonesia's economic fires.

   But the delays do little to improve Indonesia's image among creditors
and potential investors, and will not help its economy.

   It also gives rise to questions of whether a future administration would
suffer the same fate as Abdurrahman's if it fails to live up to the IMF's
expectations.

   Unexplained delays thus become very suspicious. Adding to the suspicion
was the reticent silence of the IMF's Mr No Comment.

   On the day of his departure, Anoop was again cornered by the local Press
at the hotel where he was staying.

   Some among the Press corps were exasperated by his refusal to talk,
prompting a particularly boisterous local reporter to approach him and
ask:

   "Can I have your no comment, sir?"

   Anoop walked away, and there were giggles all around.

   Perhaps Anoop and his mighty IMF do not have all the answers which they
have led the world to believe, after all.

GRAPHIC: (STF) - A delay in the release of IMF loans to Indonesia has
renewed
charges that the Fund is precipitating the downfall of embattled President
Abdurrahman Wahid.  Abdul Razak Ahmad,  who is in Jakarta, examines the
allegations, which comes amidst a rising local groundswell of criticism
towards
the IMF.  Picture - Anoop Singh ...  Mr No Comment'.