Indonesia's donors begin Tokyo meeting on fresh aid

Asian Economic News, Oct 23, 2000

TOKYO, Oct. 17 Kyodo

Indonesia's donors belonging to the Consultative Group on Indonesia (CGI) started a two-day meeting Tuesday to decide on a new aid package aimed at bridging the country's expected 2001 budget deficit of 52.12 trillion rupiah ($5.8 billion), 3.7% of its gross domestic product.

Chaired by Jamel-ud-din Kassum, the World Bank's vice president for East Asia and the Pacific, the CGI meeting is expected to be dominated by political issues and the country's corporate-debt restructuring plan.

Last Friday, the World Bank told Indonesia that CGI donor countries want to see progress in West Timor, where about 130,000 East Timorese refugees are still living in squalid camps.

Participants at the 10th meeting of the CGI come from 13 countries, as well as eight international and regional financial organizations such as the World Bank and the Asian Development Bank.

Indonesia's delegation is led by Coordinating Minister for Economy Rizal Ramli and includes Finance Minister Prijadi Prapto Suharto, Attorney General Marzuki Darusman, two legislators and several senior government officials.

Marzuki is expected to explain measures being implemented by Indonesia to disarm and disband pro-Jakarta East Timorese militias largely blamed for the continuing violence and killings in the West Timor area bordering East Timor.

On Sept. 6, pro-Jakarta militiamen attacked the office of the U.N. High Commissioner for Refugees in Atambua town, West Timor, killing three U.N. workers.

The attack was unprecedented in the history of the agency, prompting it to suspend relief operations in Indonesia.

The incident has put Indonesia under international pressure to disarm pro-Jakarta East Timorese militias, created by the Indonesian military and police as part of a strategy to win the Aug. 30, 1999 U.N.-organized independence referendum in East Timor.

Donors, especially the United States, will likely demand a full explanation of the incident.

Indonesia's apparent vacillation in pushing through a crucial corporate debt-restructuring program is also coming under fire from international donors.

Recent moves by the government to bail out firms owned by friends of President Abdurrahman Wahid as part of a corporate-debt restructuring plan have raised concerns.

World Bank President James Wolfensohn warned Wahid in a recent letter of the consequences if he fails to end the violence in West Timor.

The World Bank's Kassum has said political uncertainty, including the West Timor problem, has harmed Indonesian economic recovery.

''Factors such as political uncertainty, regional unrest, and periodic outbursts of violence, combined with policy slippage on the structural reform agenda, could still derail economic recovery,'' he said, adding the same problems have driven foreign investors away.

Kassum, however, said he is encouraged by the promising start by the new economic team led by Ramli.

''The challenge is now to build on this momentum, develop a strong poverty-oriented development strategy, improve governance at all levels, and begin to show results on the ground,'' he said.

At the ninth February CGI meeting in Jakarta, Indonesia received pledges worth $4.7 billion in fresh loans to bridge the budget deficit for fiscal 2000 ending in December. The amount included grants of $520 million.

Indonesia's foreign debts as of March 2000 totaled $144.24 billion, of which $75.04 billion are government debts and $69.2 billion are owned by the private sector.