ECONOMIC NEWS TEMPLATE

The 12th Consultative Group on Indonesia (CGI) meeting in Denpasar on 21-22 January 2003 was concluded by pledging up to USD 2.7 billion in disbursement in year 2003, figure within the range of the Government’s total budgetary requirements of USD 2.4 – 2.8 billion. This represents the lowest requirement from the CGI since the crises.

The CGI members welcomed the significant progress Indonesia had made in its macro-economic program and asset restructuring. The recognition of this progress by financial market through a strengthened Rupiah and lower interest rate has facilitated strong fiscal consolidation and enabled a sharp reduction in Indonesia’s public indebtedness as a ratio to GDP from nearly 100 % at the end of 2000 to 70% in 2002. Donors expressed continued support for Government action to move from untargeted price subsidies to more targeted program for the poor, including provision of health care and rice for the poor.

To fully capitalize on the benefit of the economic stability donors urged the government to take steps to rebuild investor confidence. In this regard, Finance Minister Mr. Boediono had outlined a package of measures being considered to strengthen the investment climate. These included speeding up the rebate of value added taxes increasing number of sectors that qualify for expedited custom processing of imports, continued efforts to improve the delivery of tax and custom services, and the establishment of a high level investment and export promotion task force that will comprehensively review factors affecting Indonesia’s competitiveness.

Members of the CGI also noted that holding the CGI meeting in Bali was a strong signal of donor commitment to supporting the government’s impressive efforts to overcome the economic and social impact in Bali bombing.

Members also welcomed the Cessation of Hostiles Agreement in Aceh. Donors agreed broadly with the main priorities for building and sustaining the peace and on the need for careful coordination in mobilizing international support. Donors also remarked that reforms in the justice sector are the key to restoring the investment climate and trust of the people.