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JAKARTA, February 2, 2000-Indonesia's donors,
meeting in Jakarta for the first time, committed their strong support to the Government of
Indonesia today, pledging to disburse up to $4.7 billion for fiscal year 2000, as well as
their assistance in helping the new Government tackle the difficult challenges of the
reform program - a program which emphasizes macroeconomic stability, bank and corporate
restructuring, social justice, and improved governance.
This CGI financing is consistent with the overall aim of
gradually reducing foreign borrowing. The Government welcomed this financial support from
the international community, especially the increase in grant and concessional funding. It
reaffirmed that it would make every effort to limit new debt obligations and ensure that
available funds are used effectively.
The meeting was opened by Indonesia's Vice President
Megawati Soekarnoputri, who set the expectations for the meeting and described the
hopes of the Indonesian people. "We can understand the high hopes that people have,"
she said, "especially after their experiencing the extraordinary difficulty
resulting from the economic and political crisis, which lasted two and a half years."
"We urge Indonesia to seize the opportunities now in
front of them - an emergence from the crisis, a new popularly-mandated Government, a
stabilized economy, and leveling-off of poverty - and grapple with the serious challenges
that lie ahead," said World Bank Vice President for East Asia and Chair of the
CGI Meeting, Jean-Michel Severino. "There is a new sense of optimism that
Indonesia can indeed resume the path of real development and yet, events in the past six
months have shown us that stability is fragile and that optimism - without sound action
and steady progress - can quickly fade. The international community has signaled its
willingness to support the new government's economic recovery program. The test of
Indonesia's resolve and the benchmark for international donor support will be the pace of
implementation of this program."
Donors, representing 33 countries and international agencies,
lauded Indonesia for completing the political transition in a way that has received strong
support at home and abroad. They noted with satisfaction the stabilization of the economy
and the early signs of recovery. The meeting welcomed the announcement of a new economic
recovery program, as laid out in the Government's letter of intent and the budget
presented to parliament on January 20 this year. Finally, they welcomed Portugal,
attending the meeting for the first time as observers, and the presence of civil society
representatives, who also were attending for the first time
In noting the challenges that lie ahead for the new government,
Coordinating Minister for Economy, Finance, and Industry Mr. Kwik Kian Gie stated, "we
stand at a crossroads in the history of Indonesia. We are determined to create a society
that is just and which delivers broad-based economic growth to our people. What we now
have achieved is macroeconomic stability - but that is not enough. Our government has an
ambitious agenda that we cannot accomplish alone. But we can begin to move in the right
direction - with the help of all involved - and look forward to creating a country where
the people believe anything is possible."
A common thread running throughout the proceedings was the
importance of building sound institutions. Minister Bambang Sudibyo summed up this
sentiment when he said, "the main task of the new government lies outside the
economic realm. Our main task is to rebuild our social and political institutions and
provide them with a firm base of support throughout Indonesian society."
Broad agreement was reached among government and donors on the
following points:
· While considerable progress has been made in stabilizing
the economy and there are tentative signs of recovery, sustaining that recovery will
require rapid progress in bank and corporate restructuring as well as measures to restore
the financial health of government. Getting the private sector "back in
business" and creating jobs again was cited as crucial to economic recovery.
· Government programs should continue to emphasize poverty
alleviation, with investment in public education and health care as a way to enhance
social equity over the long-term. As Indonesia emerges from crisis, the role of mainstream
poverty reduction programs should grow. This should be managed with care and involve local
communities and organizations.
· A critical priority for the future will be reforms in
governance. Donors gave broad support for the high priority the Government was according
in this area. It was proposed that the Partnership on Governance - an alliance between the
Government, donors and international agencies - would facilitate the preparation of a
concrete program of action based on a dialogue, led by the Government with civil society
and the private sector. The Government will present a strategically focused program at the
next CGI - a program that will include judicial and legal reforms; actions to reduce
leakage and waste in aid financed activities; and pilot programs for governance reforms in
one or two key ministries.
· Managed well, decentralization can bring important benefits
to communities and the economy as a whole. Managed badly, it could hurt the poor, bring
fiscal instability, and lead to deterioration in the quality of public services. The
government should recognize the risks of decentralization by building administrative
capacity in local governments and carefully sequencing the transfer of revenues and
expenditure responsibilities.
· Forestry management represents a prime example of where
good governance could yield rich dividends, and requires special and urgent attention.
Recognizing this, the Government is going to mobilize all the responsible agencies for
rapid action on the urgent problems described in last week's forestry seminar - illegal
logging, natural forest conversion, industrial overcapacity. At the same time, the
Government will begin to develop a National Forest Program for sustainable management. An
interdepartmental committee to follow up on these actions will have its first meeting this
month with a small group of donors to set timetables for actions.
In line with the Government's commitment to reduce reliance on
foreign borrowing, donors also had discussions on how to best structure their development
programs to meet Indonesia's changing needs, keeping in mind the overall commitment to
better management of government debt, to reallocating resources to priority areas, and
improving the development effectiveness of donor programs.
"The road ahead is long, but it is one we must
travel." said Minister Kwik. "No society can function if its people lose
confidence in the government that is supposed to serve them ... in this era of reformasi,
there is a cry for change. We must all change, and we must all work together to bring this
change for Indonesia."
Mr. Severino thanked the Government of Indonesia for their
hospitality, and donors and government alike for the extraordinary spirit of partnership
and dialogue in which they worked. He noted that this is the last Consultative Group he
will chair and, in bidding farewell to the group, he said, "I have been deeply
impressed and moved by the fortitude and character with which the Indonesian people have
faced the current crisis and I am encouraged by the gradual turnaround in the economy. I
hope that under the stewardship of the current government, Indonesia goes from strength to
strength and regains its vitality as an Asian Tiger - this time built on solid foundations
of institutions and the rule of law."
The next Meeting of the Consultative Group on Indonesia will
be held in October 2000, in Tokyo. Follow-up meetings on specific issues and consultations
with civil society will continue to be held in advance in Jakarta.---###---
Please see www.worldbank.org for the Indonesia
country page and copies of major speeches delivered at the Meeting of the Ninth
Consultative Group for Indonesia, February 1-2, 2000.
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