Subject: Transcript: IMF moves to rebuild East Timor economy

Australian Broadcasting Corporation PM News Monday, November 8, 1999 6:40

IMF moves to rebuild East Timor economy

MARK COLVIN: As the East Timorese slowly rebuild their homes and their lives the International Monetary Fund is looking at how to rebuild an economy in the territory that isn't reliant on handouts.

Gone are the infrastructure of banks and other institutions destroyed by Indonesia's departing military and their militia cohorts.

Gone also is the extensive civil service once operated by the Indonesian government, but there is at least one positive, important agricultural plantations such as coffee have survived.

The head of the IMF's mission to East Timor, Luis Valdivieso has been speaking to Michael Vincent.

MICHAEL VINCENT: The International Monetary Fund has sent a seven person team to figure out the nuts and bolts of re-establishing an economy for East Timor.

Despite seeing first hand the destruction that has taken place they're optimistic about the territory's prospects.

The head of the IMF's mission to East Timor, Louis Valdeveiso, says much of the agricultural sector has survived intact.

LUIS VALDIVIESO: Many of the important plantations like coffee for instance have not been affected directly and there is an issue of marketing, there is an issue of having the payment system in place, but port facilities are there, are working, so reactivating that part of the economy should not prove to be that difficult.

MICHAEL VINCENT: Also good news he believes is the emergence already of new developments funded by the private sector.

LUIS VALDIVIESO: There is a new hotel [inaudible], not new, but it has been put back into operation very quickly. There is another group that is trying to put rental cars in place for public transportation.

MICHAEL VINCENT: They, I imagine would be for foreigners, for non-government organisations going there?

LUIS VALDIVIESO: Or for business people who may have lost their premises. If you happen to have lost your house and your business maybe you need to be temporarily there, so it doesn't necessarily address the needs of the foreigners, it may address the needs of local businessmen who may have lost their facilities.

MICHAEL VINCENT: There is a fear, however, the money being brought in by foreigners working for the UN and other agencies will artificially inflate the East Timorese economy so that when the foreigners leave they'll take their money with them and the local economy will drop.

Another more immediate fear is that with the request for $200 million in aid East Timor will turn into a hand out economy.

But the IMF is convinced they can address both problems.

LUIS VALDIVIESO: Nobody at this point is thinking that East Timor is going to live out of hand outs for the years to come. What we are saying is that there is a significant immediate need for humanitarian assistance, and that is being orchestrated. The next to establish is what do you do to provide East Timorese with gainful opportunities, opportunities of gainful employment, a means of gaining the wrong way out.

MICHAEL VINCENT: And what are some of those?

LUIS VALDIVIESO: One of that is for instance to revive the activities of the banking sector. One of them is to make sure that the system is in place to facilitate the exports of coffee or other goods like pepper, vanilla, other kinds of horticultural goods. The idea is to make sure that the institutional structure and the legislative structure for the conduct of economic activity is sound, is transparent, is people are worried for under what conditions they can conduct economic opportunity and that will provide the necessary engine for restoring economic activity.

MARK COLVIN: The head of the International Monetary Fund's mission to East Timor, Luis Valdiveiso, speaking to Michael Vincent. -

Reuters November 10 1999

Indonesian banks to honour accounts

DARWIN -- Indonesian banks which operated in East Timor before the territory's infrastructure was destroyed by militia violence will honour East Timorese accounts, the International Monetary Fund said yesterday.

The Fund, which is preparing a report on how to establish a macroeconomic framework in the shattered territory, said three Indonesian banks had already reported making some transactions on East Timorese accounts in Kupang in West Timor and in Jakarta.

"Essentially what they have told us is that they have been and continue to be ready to authorise withdrawal of deposits by East Timorese residents, provided they can prove ownership," said IMF Asia and Pacific representative Luis Valdivieso.

"Of course, they are ready to do this but the quid pro quo is that they would like to be able to go after the borrowers who are not servicing their loans," he told Reuters.

An IMF spokesman said it would not identify the banks involved or how much was held in East Timor accounts yet.

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