Imf Team In Indonesia, Seeks Govt Assurance On Reforms

A high-level IMF team arrived in Indonesia yesterday to help pull the worlds fourth largest nation back from the brink of financial and political chaos.

IMF first deputy managing director Stanley Fischer said delegates would inspect Jakartas progress in implementing reforms seen as crucial in stemming the collapse of investor confidence.

Michel Camdessus, managing director of the International Monetary Fund, was expected in Jakarta on Wednesday.

The visitors were expected to insist the government of President Suharto, who has ruled the archipelagos 200 million people with an iron hand for three decades, demonstrate that it is not backsliding on commitments made to the IMF last October in return for a $43 billion bail-out plan.

 

With financial markets shut, the capital was quiet yesterday with no repeat of the panic rush to stock up on food seen over the past three days and sparked by the plunge of the rupiah.

News that Indonesias best known opposition leader had thrown down the gauntlet to Suharto and rebuked his government for the financial turmoil spread quickly, but initial public reaction was muted.

Megawati Sukarnoputri launched her challenge on Saturday night, telling chanting supporters outside her home that the 76-year-old former general should stand aside and let her take the reins of government instead.

I hereby take this opportunity to declare my determination to become the leader of our nation and our people if this is indeed the real consensus of the people, she said.

The daughter of the man Suharto replaced when he took power in 1965, Megawati said she was ready to stand in the presidential election in March. But analysts said there was little likelihood of her taking over.

The 1,000-member Peoples Consultative Assembly which elects the president and vice-president is weighted in favour of Suharto or whoever he might support as successor.

Suharto has already moved to counter international criticism by announcing on Saturday the delay or review of 15 major infrastructure projects worth billions of dollars.

The projects include two big coal-fired power plants, smaller geothermal plants, toll roads and a new airport in the city of Medan on Sumatra island.

Close associates and kin of Suharto, who have been accused of amassing fortunes during his more than 30 years in power, have connections with most of the projects.

Overseas pressure mounted yesterday, with Australian Prime Minister John Howard joining the ranks of foreign leaders urging Indonesia to press on with its commitment to IMF-backed austerity.

Indonesias official Antara news agency quoted Howard telling Suharto in a telephone call that Jakarta should proceed with the reforms under his leadership.

US President Bill Clinton urged Suharto in a 25-minute telephone call on Thursday to comply with IMF proposals and he sent a delegation, led by deputy treasury secretary Lawrence Summers, to Indonesia as well as other Asian countries reeling from deepening economic instability.

Summers meet Singapores prime minister on Monday morning to discuss the regional crisis before flying to Jakarta today afternoon, a US embassy official said.

In Tokyo, a senior Japanese official said he would recommend that Japanese Prime Minister Ryutaro Hashimoto call Suharto.

Japanese news agencies quoted deputy chief cabinet secretary Fukishiro Nukaga as saying he would urge Hashimoto to call Suharto to discuss Indonesias economic plight.

Indonesias financial crisis deepened after Suharto announced a budget on Tuesday which analysts said appeared to ignore the IMFs remedies.

The rupiah plummeted, falling to 10,000 to the dollar at one point from about 2,400 just six months ago. It was last traded in late US trade on Friday at 9,300/9,900.

According to newspaper reports, the IMF had called for a surplus of one per cent of gross domestic product in the 1998/99 budget, but the budget announced by Suharto was balanced at 133.49 trillion rupiah, an increase of 32.1 per cent.

The IMF had wanted fuel subsidies reduced, but the budget set fuel subsidies at 10.1 trillion rupiah. There were no provisions for fuel subsidies in the previous budget but analysts said they would have amounted to about the trillion rupiah.

Suharto has brooked little dissent since he took over the mainly Moslem country from Sukarno, Megawatis father, during a period of economic and political unrest.

Known as the Javanese King to some Indonesians, Suharto was returned unopposed as president as he has always been for a sixth five-year term in March 1993.

He said then he did not want to be president for life, but he was widely expected to seek a seventh term this year despite his age and rumours strenuously denied that he was in ailing health.

Suharto told Clinton last week his government was committed to implement economic reforms, but some analysts said wholesale reforms seemed unlikely in the run-up to presidential elections in March.

This is a political year, and politics drive economics, said Jan Lee, chief economist at Hongkong and Shanghai Banking Corporation.

You are likely to see issues of containment being addressed and the real issues of adjustment left untouched.