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Lee Kwan Yew, Volcker Urge Indonesia Not To Split With IMF
JAKARTA, Feb 19 (News Agencies) - Four prominent figures including former Singapore Prime Minister Lee Kwan Yew on Monday bluntly warned Indonesia that if it breaks from an IMF reform program and tries to go it alone, what little is left of international confidence will evaporate.
"The symbolism of such a decision to go it alone would be powerful," the joint statement issued by the four, which included former U.S. Federal Reserve chairman Paul Volcker, said.
"We would urge that you consider very carefully the clear risks of such an approach, risks that range far beyond the loss of immediate financial and budgetary assistance.
"The already fragile confidence of markets and investors, domestic and foreign would certainly be shaken."
The no-nonsense warning, addressed to the Indonesian President Abdurrahman Wahid and distributed by the foreign ministry here, came amidst increasing signs that the Wahid government was preparing to break with the IMF in a bitter dispute over reforms.
The "aide memoire" signed by Lee, Volcker, Germany's Ulrich Cartillieri and Japan's Nobuo Matsunaga - also made it clear that they sided completely with the IMF in the dispute, especially the Fund's insistence on the independence of the central bank, Bank Indonesia.
The way to handle the standoff, the four urged, was not going it alone, but dealing with the IMF's "legitimate concerns," including "pervasive cronyism and corruption," and judicial reform.
By so doing, Wahid would speed the day when "Indonesia might safely, and even triumphantly, be free of the close surveillance inherent in the IMF program," it said.
But now progress and reform are crippled, it said, and the cure would take "a long and sustained effort."
"What seems essential is that you signal to the country in unmistakable terms the necessity of undertaking that effort," it told Wahid.
The four were invited to Indonesia as "international advisors" by the president, whose chief economic minister, Rizal Ramli, a longtime IMF critic, lashed out at the IMF last week for holding up $400 million in aid over the failure to implement the reforms it had demanded.
Signaling that he was fed up, Ramli said the IMF was pushing too hard, and that the government knew best what was good for it - not the Fund.
Ramli also slammed the IMF - which coordinated a massive $46 billion bailout fund for Indonesia when its banking system collapsed under the onslaught of the 1997 regional economic crisis - for not understanding the difficulties of Indonesia's transition to democracy.
The four countered by saying that Indonesia was at a critical juncture when its "historic efforts" towards a working democracy would "be surely jeopardized - indeed made fruitless - by failure to address" reforms.
Specifically the advisors said they shared the concern of the IMF on the "most difficult and critical issue" of central bank independence, and urged that current legislation before parliament on the bank be withdrawn and rewritten.
Fears have been raised by the IMF and by many Indonesian economists that the current legislation - pushed forward in the name of accountability - is designed to put the central bank in the pocket of politicians, as it was during the 32-year rule of ex-president Suharto.
IMF officials here have privately expressed intense frustration over the central bank legislation, and the possible "pork barrel" use by politicians of central government approvals, rather than a ban, on regional borrowing.
Ramli, who is understood to have strong backing from Wahid on government control of the central bank, is due to head for Washington this week for talks with IMF first deputy managing director, Stanley Fischer.
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