Interview Rijanto Sastroatmodjo:

Juga bisa diakses di http://www.pdat.com/tempo	Edition 35/02 - 31/Oct/1997
	Analysis & Events

These are the IMF Team's Results, Minus the National Car Project

The IMF team has announced its decisions. We can breathe a cautious sigh of relief, but the national car project is to go on. The question is, will it have to compromise?

After two weeks of negotiation with the International Monetary Fund (IMF) team, Indonesian monetary officials finally announced a serial reform of Indonesia's economy. The announcement was made in Jakarta on Friday by Minister/State Secretary Moerdiono, Minister of Finance Mar'ie Muhammad, Governor of Bank Indonesia, Djiwandono, and the Minister of Industry and Trade, Ariwibowo.
This is the first time that the government announced such far-reaching steps to repair Indonesia's ailing economy, which has been plagued by the monetary crisis since July 1997.
But one question has finally been answered: IMF, the World Bank, and the Asian Development Bank will give aid, with the figure to be determined soon.
The government has outlined four programs to handle the crisis. These are: reform of the financial sector, fiscal policy, monetary policy including currency rates, and an extension and intensification of the deregulation program.
It seems the IMF team, assisted by the World Bank and the Asian Development Bank, will allow plenty of time to the Indonesian government. All the recommended programs will be executed within three years. But we can expect tight supervision from the IMF.
What are the targets of these four programs?
The fiscal program is aimed at reducing the budget deficit. Even in the coming 1998/1999 fiscal year, the target is a surplus of 1 percent of the gross national product. It is forecast that declining economic activity will result in a lower growth rate - below 7 percent. But it is expected that the 7 percent figure will be reached again in 1999/2000 and the following years.
There is nothing new in the monetary program. The government is determined to keep inflation in single figures each year.
The structural adjustment program, as an extension of deregulation, contains a few "little surprises". For instance, a number of monopolies will be cut. The most interesting is the loosening of the trading rules on wheat, flour, soybeans, and garlic, so that anyone can import these commodities. This will begin on January 1, 1998. Imported soybeans and garlic will be subject to a 20 percent import duty and garlic, 10 percent. The Government will still subsidize flour.
Up to now, the flour trade has been delegated to Bulog (the National Logistics Agency) which appointed PT Bogosari to mill the flour. PT Bogasari is controlled by Sudwikatmono, Sudono Salim and members of Soeharto's family. Garlic trading has also been controlled by Sudwikatmono, a relative of President Soeharto. One thing that should be taken into account is the removal of the temporary standard price of cement. This is also a small blow for the Salim Group which has up to now controlled the cement market through PT Indocement Tunggal Prakasa.
How about the controversial national car project? The show will go on, of course. But, take note: its fate will be determined after the WTO assembly. However, those likely to be hit by the retrenchment are a number of state owned companies and strategic industries. Though they were not mentioned, it seems that Minister Habibie's projects will be the first to feel the impact.
What about the monetary sector? At any rate some banks will be hit by the recovery program. The form of the program has not been determined, but liquidation of some banks cannot be avoided. In Jakarta a list of would-be liquidated banks has been circulated, but a source said, "Lists like that are only the creation of bankers. And there were a lot of versions of the list." In affected finance sector, apart from private banks, there are government banks, finance institutions, insurance and pension funds, mutual funds and securities companies.
Governor of Bank Indonesia, Djiwandono affirmed that the bank recovery process will use various means: acquisitions, mergers, and liquidation for banks that are beyond "recovery". Meanwhile in Jakarta, a rumor was spread: 19 banks are to be liquidated. However, this figure was not confirmed by Bank Indonesia.
How many banks should be liquidated? An economic observer, Umar Juoro, said that about 30 banks could be "cut down", though former Bank Indonesia Director, Nyoman Moena, thought less than 10 banks would be liquidated.
If they are liquidated, an economic observer, Pande Radja, warned that Bank Indonesia should first publish the bank reports. The aim is so that people will not panic as occurred when Bank Summa was liquidated.
Rijanto, an observer and writer on banking issues, judged that the government's steps to liquidate some banks are a bit late. In fact, many banks should have been liquidated already, but BI seems unable to take a firm stand on the matter. At any rate, according to Rijanto, a big rush can be expected as a consequence of liquidation.
In the end, government has agreed with the IMF, though perhaps not all the negotiation fronts were won by the team from Washington. Tony Prasetyo from Gadjah Mada University, Yogyakarta, was initially worried that the government would refuse IMF funds, because of aid from neighboring countries. Singapore, for instance, has provided US$ 10 billion, which is considered enough to overcome the crisis.
Will these recovery programs go smoothly? It depends on how far the monetary officials compromise on important decisions in the field.
TH