Closing Statement by
Coordinating Minister for Economic Affairs

Interim Consultative Group on Indonesia Meeting
24 April 2001

Mr. Chairman
Distinguished Delegates



The Interim CGI was planned to be a review of the progress of the measures raised at the Tokyo CGI. But it turned out to be a very crucial meeting for the government and the donors.

This meeting was held at a time when it is becoming evident that the global economy is showing signs of weakness. Our dynamic domestic politics is also very complex and difficult for many to understand. The rupiah has depreciated considerably and monetary response to this has contributed to high domestic interest rate. In the six months since we met in Tokyo, we turned from a situation where we were beginning to see sustainable growth to that of an immediate urgency to secure our fiscal sustainability. This is evidence of globalization and the extent to which the global economies are intertwined.

Mr. Chairman,
Distinguished Delegates

Although this was an interim CGI to jointly review the progress in various areas, it became an equally important preparatory session for the October session. This meeting coincided with the third review of the IMF mission and gave the government and the IMF the opportunity to explain our fiscal position and the challenges ahead.


You have heard the broad austere measures we propose to introduce to secure our fiscal sustainability this year. We will consult with parliament and seek their collaboration and appeal to the people in Indonesia to act together in a concerted national effort to overcome this difficult transition period.

You have been our staunch development partners and have been very generous in your pledges of assistance at the Tokyo CGI. We had thought that with the growth momentum and a favorable global outlook, we would not need to draw on your resources as part of our prudent external debt management. Unfortunately, this is not the case now. We are appealing to our development partners to disburse your committed funds to alleviate our budget burden. For those assistance that were tied to policy conditions, we request you to exercise greater flexibility to modify such conditions to reflect the current situation and to disburse the funds as soon as possible. Where we can formulate new programs that will allow us to access additional quick disbursing budget assistance, we will work with you closely to formulate these on 'fast track' approval basis. We request you to review this.

The Asian Development Outlook forecast that this year's slowdown will be short-lived and the region will return to its growth trend in 2001. We hope this will be correct. 1 hope to report during our October meeting that our fiscal position has been stabilized and we are returning to a more sustainable path of development. But should the global economy fails to improve, we would seek your further support.

Many of you have urged us to accelerate our reforms and restructuring efforts. We have no choice but to do so under the circumstances. We will accelerate our program of asset sales, corporate restructuring and privatization but with full governance.

Our proposed fiscal adjustment measures would demand high level of commitment from our officials to implement the program. Many of the proposed measures would affect the poor and we will ensure that mitigating measures are in place to minimize their impact. At the same time, we will continue to improve our climate of legal certainty and rule of law to promote the return of investors' confidence.

Mr. Chairman
Distinguished Delegates

Our fiscal position will remain vulnerable for some time. Before the crisis, we had a balanced budget with a reasonable level of resources set aside for development. Our development partners have supported us to finance a part of our budget. Since the crisis, our budget structure has been completely distorted and now, a third or more of our expenditure has to be earmarked for domestic and external debt service obligations. This has lowered our ability to set aside a higher level of resources for development including programs to reduce poverty. Our budget is now very dependent on our monetary policy and its exchange and interest rate movements.

In the nearly four years since the Asian crisis, our heavy debt burden has hampered our development. We remain committed to deal with the debt burden through economic measures that aim to promote equitable growth and an economic restructuring program that involve amongst others, accelerated asset sales, corporate restructuring and privatization. But this debt burden is likely to remain with us for some time and we look to the international community to help us with sustainable alternatives to deal with the problem of 'debt overhang'. I hope, Mr. Chairman, that you would consider including this topic for special discussion at the forthcoming CGI.

Mr. Chairman,
My cabinet colleagues
Distinguished members of the delegation
Ladies and Gentlemen.

On behalf of my Indonesian authorities, I like to convey our sincere appreciation to all of you for this very fruitful two days of discussions. Although this meeting was overshadowed by concerns on our fiscal sustainability, my colleagues and 1 commit to work hard on the reform agenda but without losing sight of our need to deal with our fiscal sustainability.



Before closing, I like to thank Mr. Ravi Rajan, Resident Representative of UNDP who will be leaving us soon to take up a new assignment. Ravi has been known for his very energetic drive during his tenure in Indonesia. He oversaw two landmark initiatives for UNDP in Indonesia; that of monitoring the referendum in East Timor and the Partnership for Governance Reform Program. Although the latter had encountered start up difficulties not associated with the program leadership, I believe it is now gathering momentum and I am assured it will now spearhead the joint governance reform efforts of the government and the international community.

I should also mention another important contribution from Ravi. When the Agency for Coordination of Poverty Reduction was being formed, Ravi responded quickly to provide UNDP assistance. But he impressed me with his dedication to this important agenda and acted flexibly to overcome UNDP bureaucracy to put this assistance in place quickly. I am sure all of you will join me in thanking Ravi for his contribution to development in Indonesia and wish him the very best in his new assignment.

Mr. Mark Baird's competent leadership of the World Bank's Indonesia country program needs no further compliments. The Government and I am sure donors recognize his valuable contribution during this crucial period of our development. And to add to his credit, he has once again ably demonstrated his tremendous managerial capability in chairing this first interim CGI and managing the tight and diverse program efficiently. To Mark and his many colleagues who organized this meeting, my Government is grateful for its successful organization.

For visiting delegates, 1 wish you bon voyage or Selamat Jalan. For those residing in Jakarta, 1 look forward to continuing our exchanges.



Thank You.