[stop-imf] Indonesia Promises IMF A Crackdown on Debtors

[Robert Weissman]

Dow Jones Newswires
June 12, 2002

Indonesia Promises IMF
A Crackdown on Debtors

By TOM WRIGHT

JAKARTA, Indonesia -- The Indonesian government promised the International
Monetary Fund it will take strong action against former bank owners that
refuse to pay billions of dollars they owe the state, in a letter to
Managing
Director Horst Kohler.

The IMF is currently negotiating with the Indonesian government over
reforms
the country must complete in return for the next $340 million in loans
under
the fund's total $5 billion program for the country.

Indonesia had promised the fund it would publish documents by April showing

which of the former bank owners -- including many close business associates

of former president Suharto -- had repaid debt. The bank owners signed
agreements with Indonesia in 1998 to hand over assets to help repay
billions
of dollars the state spent bailing out the banking system after the Asian
financial crisis.

But in its letter to Mr. Kohler, dated June 11, Indonesia said it had been
unable to publish the information due to "the significant volume of legal
documentation involved." The government plans to tell the public which
debtors have fulfilled their agreements by July, the letter said.

"The government remains committed to taking strong actions against former
bank owners who fail to meet their outstanding obligations," it said.

Debtors will have three months from the publishing of the documents to hand

over assets to the state to cover their debts.

Indonesia's asset sales program so far has been driven by sales of
companies
formerly belonging to the Salim Group. Once the country's largest
conglomerate, the group handed more than 100 companies to the state after
its
Bank Central Asia crashed after the crisis.

Other high-profile debtors, such as Syamsul Nursalim of the Gajah Tunggal
Group, have been locked in disputes with the government over asset
transfers.

Jakarta needs the assets to help repay some of the $60 billion the
government
spent bailing out banks in recent years. The rescue efforts have left the
government with public debt of $130 billion, or equal to last year's gross
domestic product.

Indonesia said it still plans to launch the sale of a 30% stake in
state-owned PT Bank Mandiri by the third quarter after delaying the sale
from
the middle of this year. It also plans to sell Bank Niaga by mid-September,

after canceling the auction of a 51% stake in the bank this month due to
low
bids.

The fund has continued to lend to Indonesia this year despite these delays.

Creditors are also acting leniently toward Indonesia, rescheduling debt at
a
time the country appears to be recovering from years of political and
social
instability.

The government is "resolute" to keep the budget deficit at 2.5% of GDP this

year despite lower-than-expected revenues in the first quarter due to
nationwide flooding, the letter said.

Indonesia's budget deficit totaled 5.6 trillion rupiah ($638.2 million) in
the first quarter, above an IMF agreed target of 2.7 trillion rupiah, due
to
revenue shortfalls. The government expects higher revenues for the
remainder
of the year from dividends and other nontax revenues from state owned
enterprises.

Write to Tom Wright at tom.wright@dowjones.com

--------------------------

Indonesian economic reforms bearing fruit: Kuntjoro-Jakti

JAKARTA, June 12 (AFX-ASIA) - Economic reform efforts were beginning to
bear
fruit, coordinating minister for the economy Dorodjatun Kuntjoro-Jakti
said.

"I think we can truthfully say that we are now seeing the first fruits of
the
changes that this government has been able to implement over the past 10
months," he said in remarks to open the mid-year review of the Consultative

Group on Indonesia (CGI), the country's major international creditors.

Kuntjoro-Jakti said economic growth rose to an annualised 2.5 pct in the
first quarter of this year from 1.6 pct in the fourth quarter of 2001 and
inflation continued to fall.

The rupiah has strengthened by more than 17 pct since November and almost
28
pct from the last days of the government of president Abdurrahman Wahid.

A strong rupiah is attributed to the "dramatic" slowing of money supply
growth, improved relations with international financial institutions, a
reduction in subsidies and more asset sales, the minister said.

Non-oil exports and imports in April increased by 6 pct and 10 pct
respectively.

Kuntjoro-Jakti said improved security had also helped economic recovery.

"These data give us reason to believe that growth is continuing to rise
into
the second quarter of 2002 and that we should ultimately be able to reach
or
exceed the targets in our budget for this year," he said.

"In summary, we believe that the macro-economic picture has brightened
significantly over the past six months and if we keep true to our economic
programme, the macro-economy should continue to improve through 2002 and
into
2003," he added.

The International Monetary Fund (IMF) country representative, David Nellor,

said Indonesia had made a "considerable effort" to strengthen
macro-economic
policy and pursue structural reforms but urged it not to falter.

"The authorities should now move decisively and steadily to enhance
implementation of their economic reform programme and deepen their efforts
in
the broader areas of structural reform," he said.

Nellor said Indonesia should stay the course with a prudent budget policy.
It
should provide a regulatory and supervisory framework to allow a recovery
of
credit as well as reduce vulnerabilities in the banking system and restore
investor confidence.

tn-vt/pb NNN AFN