Also: AFR: World Bank warns Jakarta

Indonesian Observer 
September 29, 2000

PRAGUE - The consultative group of aid providers for Indonesia will meet in Tokyo on October 17-18, as planned, after successful discussions with the World Bank here, World Bank President James Wolfensohn said on Wednesday.

Wolfensohn said in a statement he had held a constructive meeting with Indonesia's Coordinating Minister for the Economy, Rizal Ramli and was encouraged by Ramli's business-like approach to tackling economic problems.

"In a very short time, he has taken full ownership of the (IMF) letter of intent, and is pushing ahead with implementing very difficult, but necessary, reforms," he said.

"We both agreed that progress on corporate debt restructuring lay at the heart of the program," he added.

IMF spokesman David Hawley said Indonesian ministers had assured the fund that the reform program would be implemented rigorously. "The fund management and staff reiterated their strong support for Indonesia's economic reforms," he added.

Indonesia turned to the IMF for help in 1997 when it was swept into the Asian financial crisis of 1997-99. But stop-start reforms delayed an economic turnaround and it is the only victim of the crisis which is still receiving money from the fund - the last cash injection was approved earlier this month.

Wolfensohn said Ramli had outlined an "ambitious" ten point program to accelerate economic recovery. "This covers a number of important objectives, including programs to develop rural infrastructure and small/medium industries," he said.

"These programs will not only support short-term recovery from the economic crisis, but they will also help create jobs and reduce poverty over the medium term," he added.

Wolfensohn said he was encouraged to hear some initial steps had been taken to prosecute those responsible for recent murders in West Timor and to disarm militia groups there.

"Continued progress in this area will help promote peaceful development in Indonesia and East Timor and is essential to restore the confidence of the international community," he said.

He noted this was essential to mobilize much-needed financing from official donors and private investors alike.

Wolfensohn said the World Bank had responded positively to Ramli's request for additional concessional resources subject to satisfactory progress in putting in place a poverty reduction strategy and improving governance - the word the global lender tends to use when it talks about top-level corruption. -Reuters

Australian Financial Review 
September 29, 2000

World Bank warns Jakarta
By Sheryle Bagwell, Prague

A senior World Bank official said it was "essential" that Indonesia succeed in quelling marauding militia groups in West Timor if it wanted to maintain the support of international aid donors.

The World Bank's vice president for East Asia, Mr Jemal-ud-din Kassum, said aid donors were looking for real progress in disarming pro-Jakarta militia groups by next month's "milestone" meeting in Tokyo of the World Bank-chaired Consultative Group on Indonesia.

"For a number of donors, there is clear recognition that progress in this area is essential, and I think the Indonesian authorities are very much aware of that," Mr Kassum said.

"The Tokyo meeting is certainly a milestone at which it will be important to see real progress in a number of key areas including this one. Results matter, and results will count heavily in gaining [donors'] support."

Mr Kassum's comments follow a meeting between World Bank president Mr James Wolfensohn and the Indonesian Co-ordinating Minister for the Economy, Mr Rizal Ramli, on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Prague last week.

Mr Wolfensohn sent a letter to Indonesian President Mr Abdurrahman Wahid earlier this month urging him to crack down on the militia groups which were blamed for this month's killing of three United Nations refugee workers in West Timor, and suggesting that further international aid may not be forthcoming if he failed to do so.

In a statement released on Wednesday, Mr Wolfensohn said he had been assured by Mr Ramli that President Wahid was "committed to tackling the problems of West Timor in a timely and responsible manner". He also said that the CGI meeting with aid donors would go ahead as planned in Tokyo on October 17 and 18.

In a statement, Mr Wolfensohn said, "Continued progress in this area ... is essential to restore the confidence of the international community. This is essential to mobilise much-need financing from official donors and private investors alike."

Australia and other members of the 20-member CGI are losing patience with Indonesia's lack of progress in disarming the militia groups. The Australian Financial Review reported this week that Australia was considering seeking a postponement of the Tokyo meeting if delays continued, raising questions about continued bilateral aid from Australia, World Bank assistance and future IMF programs to Indonesia.

Mr Kassum, in an interview with the AFR, said that the Indonesian Government fully understood the concerns of the international community over West Timor. But in a speech to the IMF-World Bank meetings, the Indonesian Finance Minister, Mr Prijadi Praptosuhardjo, suggested that Indonesia did not appreciate Mr Wolfensohn's vocal role in the issue.

Mr Prijadi expressed his "deep concern" at what Indonesia believed was an increasing tendency for the World Bank to get involved in non-socio-economic issues in member countries.

"We believe this is not a healthy development and can adversely affect its relations with its clients and thus its effectiveness in poverty alleviation," Mr Prijadi said.

Mr Wolfensohn made it clear in his statement that the World Bank would continue to support Indonesia "as a long-term development partner".

The World Bank has $5.5 billion in outstanding commitments to Indonesia, of which $2.8 billion has not been disbursed. That includes money for 64 specific projects as well as structural adjustment programs that help support the budget and fund social programs.

In response to concerns about the effectiveness of these loans, Mr Kassum said the World Bank had taken "proactive" steps to ensure there was adequate prudential supervision of all its disbursements to Indonesia.

"We are taking appropriate steps to improve performance in this area and we will continue to seek ways in which we can further improve our performance," he said.

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