Donors Reaffirm Support  for Indonesia US$4.8 billion pledged at Tokyo meeting October 18, 2000—The tenth meeting of the Consultative Group on Indonesia (CGI) concluded today in Tokyo after two days of discussions on the Indonesian economy. “Three issues were of paramount interest at the meeting—the continuation of structural reform as outlined in the letter of intent to the IMF, the clear articulation of a poverty reduction strategy, and implementation of a comprehensive governance program that covered legal and judicial reforms, decentralization, and forest management,” Jemal-ud-din Kassum, World Bank Vice President for East Asia and Pacific Region and Chairman of the CGI, said today. He added, “I was struck by the very open and substantive exchange of views. This created a positive atmosphere and reinforced the strong partnership between the government and donor community.”. Donors announced their pledges at the close of the two-day meeting after reviewing the Government’s priorities, policy initiatives, and strategies for implementing key economic, social and institutional reforms central to accelerating Indonesia’s recovery. In all, the donors pledged US$4.8 billion to support the government budget. “These pledged resources will be adequate to finance the budget and our development programs, but we recognize they are mostly loans and will add to our government’s already onerous debt situation. Therefore, we will only draw upon these funds if absolutely necessary and only after exhausting every alternative to meet our development needs from domestic sources,” said Coordinating Minister for Economic Affairs Rizal Ramli. A further US$530 million was pledged for technical assistance grants and support for Indonesian non-government organizations. The Indonesian delegation, led by Ramli, briefed the international donor community on the state of the Indonesian economy and on the status of policy reforms in a broad range of areas. Ramli also explained the latest situation in West Timor and government actions to disarm the militia, and reported that individuals had been arrested in connection with the murder of three UNHCR workers and seven Indonesian civilians in Atambua last September. “We remain committed to resolving the security challenges in the border areas of West Timor, and many steps to address this matter have already been taken,” he said. The donor community welcomed the Indonesian Government’s invitation to a Security Council mission to observe progress in West Timor next month and noted the importance of continued progress in this difficult area. They offered assistance and support to the refugee humanitarian and resettlement program once security conditions permit. On the current state of the Indonesian economy, donors were encouraged by some recent positive trends. They noted that economic growth has taken hold, and its base has expanded beyond consumption. Inflation is contained, and the numbers of those living below the poverty line are declining. Nevertheless, donors urged the government to deal with domestic political and security issues (including regional unrest in Maluku, Aceh and Irian Jaya, also called West Papua.) Failure to take appropriate action could weaken market sentiment and slow, or even stall, recovery, they said. On the program of structural reforms, “one message that emerged strongly was the critical importance of keeping the reform program—as described in the government’s Letter of Intent to the IMF—on track,” said Kassum. One structural reform issue that attracted particular attention was the pace and quality of corporate restructuring. In the session on poverty reduction, the clear, strong content of the government’s statement was welcomed by many donors. There was broad recognition that poverty concerns should permeate all government policies and programs, and recognize the special needs of the vulnerable, in particular women and children. The overarching strategy bringing together these different initiatives would rest on the three cornerstones of economic opportunity, empowerment, and security. On the governance agenda, the government presented progress on the Partnership for Governance Reform. Strong emphasis was placed on legal and judicial reform, decentralization and forestry management. The donors recognized that the government inherited weak institutions and governance systems, and has initiated reforms on many fronts. But progress has been slow—certainly in relation to the expectations of the people and the international community. Donors understood the huge constraints confronting the government and the difficulty of tackling such deep-rooted problems. At the same time, the international community wanted to help accelerate momentum—especially in key areas such as legal and judicial reforms, decentralization, and forest management. On development priorities, aid effectiveness, government debt and financing requirements, a more participatory approach to aid utilization and management was recommended; one that involves civil society groups. The government presented the key features of the draft budget and highlighted its development priorities. It also presented proposals for strengthening financial management and procurement systems that will ensure government resources reach intended beneficiaries and improve the effectiveness of aid. This year’s CGI meeting included five representatives of civil society groups, which presented a joint statement on their development priorities and concerns. This participation was welcomed by the donor delegates and the Government of Indonesia. Donors have agreed to hold a mid-year interim CGI meeting in Jakarta six months from now, while the next CGI is tentatively planned to be held at the same time next year—also in Jakarta.