Excellencies, Distinguished Delegates, Ladies and Gentlemen:

Welcome to this, the Eighth Meeting of the Consultative Group for Indonesia

What a difference a year makes! When I opened this meeting last year, doom and gloom dominated and the future seemed very uncertain. Indonesia was in the deepest months of the economic crisis. The currency had depreciated by 80 percent, inflation was rising, and output was falling by 13 percent for the year. The social fabric of Indonesia was under severe strain, bringing in its wake violence and an increase in poverty. But, as a group—Government and donors—we came together, at last year’s CGI, and in the months afterward, and everyone did their part.

And now, look where we are—the economy has stabilized, and the social impacts of the crisis, while severe, are not as catastrophic and all embracing as we had feared. Children have not dropped out of school in the tens of millions, and the streets have not been flooded with unemployed people. The Government has managed to put in place a credible reform program, tackling the banking sector, making difficult decisions on bank recapitalization, beginning work on privatization and restructuring. They have managed to implement a social safety net program which, although far from perfect, has succeeded in keeping poor families fed and children in school. And, let’s not forget what surely must have been one of the most remarkable accomplishments yet—the parliamentary elections held in June, the first free and democratic elections Indonesia has experienced in four decades. How many of us here today thought that possible one year ago?

But it was possible, and now, one year later, while the economy is still struggling to recover, and society is still struggling with the erosion of years of poverty reduction, there is a feeling of hope, a feeling of possibilities, of opportunity. Hope that the progress made in the past twelve months does provide a foundation on which to build for the future—and that this is a foundation which many represented here have contributed to in the past year, and will continue to work on in the future. There are encouraging signs of a nascent recovery. These have been very modest, but positive growth was recorded during the first half of 1999. There has been no inflation since February. And the rupiah has strengthened by about 50 percent.

Encouraging though these achievements are, we must not become complacent. Macroeconomic stability does not complete a recovery any more than the foundation provides a house to live in. Bank and corporate restructuring is still far from complete. And social safety nets are still needed to protect vulnerable groups from slipping further below the poverty line—and losing all hope in the future. Institutional reforms to generate transparency, rebuild confidence and combat corruption have begun but are likely to take years to implement fully. The economic, social, and political situation is fragile. The Government has done a remarkable job stabilising the economy and implementing the first stage of reforms. And it needs to persevere, continuing to make good decisions in politically difficult times. And we are here, as members of the CGI, to look at our role in helping the government and people of Indonesia meet this challenge. The basic message going into this meeting—for both the Government and the donors—is to "stay the course."

When I visited Jakarta last month, the question of holding the CGI in July was still very much in question. As you may know, a number of civil society groups were calling for it to be postponed until the new government was in place. Before going to Indonesia, I met with INFID in Washington to hear their concerns. While in Jakarta, I met with the leaders of the major political parties, as well as with government officials and the local donor community. I was impressed by the spirit of pragmatism and patience, and by the maturity of the political debate. There was widespread recognition that the CGI process should go ahead as scheduled, to maintain the momentum of the reform program and ensure financial support during a period of political uncertainty. I also took away a number of clear messages—such as concern over the rising level of debt and how effectively resources are being used—which have helped to shape the agenda of this meeting today, and will most likely feature in future meetings of the Consultative Group.

Over the course of the past year, the donor community had many opportunities to walk away, to "sit it out on the sidelines", as Minister Boediono once remarked—but they did not. We need to continue our commitment to support the Government of Indonesia with that building process. And, we must ensure that the new government inherits an economy which is in good shape. But we also need to be conscious of the fact that we are in a period of political transition—and that many decisions on the longer-term direction of Indonesia will have to be taken by the new government. We have suggested that the CGI could reconvene in about six months time—with the new government—to revisit financing needs and priorities for next year. We would also hope that civil society will actively participate in the policy debates over the coming months—and possibly join us in the next CGI meeting as well.

Before I invite Minister Ginandjar to deliver his opening remarks, I would like to welcome the Netherlands, who is here for the first year as a full participant in our discussions of the CGI. And, as always, I would like to encourage everybody, in the spirit of broad participation, to enter into this dialogue very openly and interactively. In this way, we can learn from each other and work together to build upon the achievements of the past year.

And now, I call upon His Excellency, Dr. Ginandjar Kartasasmita, Coordinating Minister for Economy, Trade, and Finance, and Head of the Indonesian Delegation, to make his opening statement and help set the direction for this meeting.

Thank you.

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