STATEMENT BY MARK BAIRD, COUNTRY DIRECTOR FOR INDONESIA ON THE CONSULTATIVE GROUP MEETING FOR INDONESIA (CGI)

JAKARTA, July 21, 1999 — The World Bank will chair the next meeting of the Consultative Group for Indonesia (CGI) on July 27-28 in Paris. We believe it is important for the international donor community to meet with the Government of Indonesia at this time for a number of reasons:

• To keep the economic reform program on track, review progress made since the last CGI and agree on policy priorities for the next six months - this will ensure that the recovery is sustained and the new government inherits a sound economy.
• To focus attention on governance and corruption issues, assess what has actually been achieved to date, and what more is needed to reduce leakage of public money, especially for aid-financed programs.
• To ensure the budget is financed this year, and that the available resources are used effectively. The CGI will be expected to provide $5.5-6.0 billion in disbursements during FY99/00. This compares with the $7.9 billion pledged- and $6.2 billion actually disbursed- last year.
• To initiate discussions on the budget framework for next year, focusing on ways to mobilize domestic resources to reduce the fiscal deficit. The CGI proposes to meet again with the new government in about six months time to finalize the pledges of financial support for FY00/01.

There have been a number of calls from civil society groups for the CGI to be postponed until a new government is in place. We believe the meeting should go ahead for the reasons outlined above. However, we agree that the focus should be on the short-term measures needed to sustain economic recovery- without pre-empting the options of the new government. Hence the proposal to meet again with the new government in about six months time. We hope that civil society groups will participate actively in the preparations for that meeting- including discussions around longer-term development priorities for Indonesia.

The local CGI donors met with representatives of the major political parties on Monday, July 19, to hear their views on economic policies and donor programs. Four of the five parties represented agreed that the CGI meeting should go ahead as planned, focusing on short-term policy issues and financing needs. All of the representatives supported the broad direction of the IMF-sponsored economic reform program, however, they presented a range of options on how to speed up progress in some key areas, including bank and corporate restructuring and the anti-corruption program. They also agreed on the need to focus more on the sustainability and effectiveness of foreign borrowing in promoting development, generating employment and reducing poverty. We will convey these views to the CGI participants in Paris.

The CGI is a donor coordination group that meets annually with the Government of Indonesia to discuss development priorities and foreign assistance needs. The meeting usually takes place in July and concludes with a pledging session linked to the GOI budget planning process. Because of the crisis, the last meeting focused on the immediate financing needs for FY98/99 only. An Interim CGI meeting, held in Jakarta in January 1999, provided a forum to discuss progress in key areas of the economic reform program and the response to the social impact of the crisis.

The meeting will be held on Tuesday and Wednesday, July 27-28, 1999 at the World Bank's European Office, 66 Avenue d'Iena, 75116 Paris, France. A background paper by the World Bank, "Indonesia: from Crisis to Opportunity" is being distributed in advance (see separate press release).

Participants in the CGI include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Korea, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom, United States; Asian Development Bank, European Investment Bank, European Commission, International Finance Corporation, International Fund for Agricultural Development, International Monetary Fund, Islamic Development Bank, Kuwait Fund for Arab Economic Development, Nordic Investment Bank, Organization for Economic Cooperation & Development, Saudi Fund for Development, United Nations Children’s Fund, United Nations Development Program.

AGENDA

Tuesday, July 27
I. Opening Statements
   Chairman
   Government of Indonesia (GOI)

II. Emerging From Crisis: Staying the Course of Reform
   GOI Statement
   IMF Statement
   Discussion

Coffee

III. Building a Longer-term Development Agenda
   GOI Statement
   World Bank Statement
   Discussion

Lunch

IV. Addressing Governance and Corruption
   GOI Statement
   Asian Development Bank Statement
   Discussion

Wednesday, July 28

V. Carryover from Day 1

VI. Foreign Assistance Needs and Pledging
   World Bank Statement
   Donor Statements

Coffee

VII. Closing Business
Arrangements for Next Meeting
Approval of Press Release
Chairman’s Summary and Closing Statements

Press Conference