S'pore to help Jakarta restore confidence

By Susan Sim Straits Times Indonesia Correspondent. Oct 22, 1997

JAKARTA -- Prime minister Goh Chok Tong yesterday pledged that Singapore would help Indonesia in its efforts to restore confidence in its economy.

Following a meeting here between Mr Goh and President Suharto in the morning, both governments issued, separately, this statement:

"The two leaders agreed that the Singapore government would help to supplement the IMF efforts in restoring confidence in the Indonesian economy. They directed their ministers to work out ways to implement the agreement."

No details were provided, but Indonesian state secretary Moerdiono told local reporters that the Singapore aid "is to further strengthen our foreign exchange reserves and, at the same time, to strengthen our rupiah".

He added: "It can be understood that this assistance will be in the form of money."

According to him, Mr Suharto has assigned finance minister Marie Muhammad and central bank governor Sudrajad Jiwandono to discuss the deal with their Singapore counterparts.

Declining to give any figures, he said: "Our forex reserves are still quite large but what we need is to multiply the umbrellas that are necessary . . . This assistance, whatever its amount or its name, should be substantially large to be able to restore confidence." Singapore's move, he said, was unrelated to an aid package being put together by the International Monetary Fund (IMF) that would be decided on by the IMF board at the end of the month.

"This is bilateral assistance from Singapore to Indonesia, in line with our regional spirit," he noted.

Sources here told the Straits Times that it was the Indonesian coordinating minister for production and distribution, Mr Hartarto, who pitched the idea to Mr Goh shortly after the currency crisis began.

The Indonesian minister was picked as Jakarta's emissary because he had worked closely with Mr Goh on bilateral projects, and would be seen as "a friend with a lot of credibility", a source with access to his office said.

Jakarta had hoped to be able to obtain direct assistance from countries such as Singapore and Japan, after spending more than US$1.5 billion (S$2.37 billion) of its reserves defending the rupiah before bowing to market forces and allowing it to float in mid-August.

"Our ties with Singapore have a lot to do with our being friends and neighbours, so we don't think there would have been any kind of requirement," the source said, referring to concerns here that aid from multilateral agencies would come with stringent performance indicators.

Jakarta turned to the Fund two weeks ago when it was clear it would not be able to marshall enough resources bilaterally. Yesterday, Mr Goh told Mr Suharto he agreed with the World Bank's view that Indonesia's economic fundamentals were very sound.

"He also noted that the effective market-oriented policies adopted by Indonesia since the crisis began would help it to overcome the present problems," a six-point statement from both sides noted.

It added that Mr Goh had viewed the loss of investor confidence as a significant factor contributing to the weak rupiah and that restoring this confidence was the priority.

"The key is the successful conclusion to the IMF discussions and the prompt implementation of a joint programme agreed upon by Indonesia and the IMF," it said.

During their talks, which exceeded the scheduled one hour by 15 minutes, they also discussed the coming meeting of leaders of the Asia-Pacific Economic Cooperation (Apec) forum in Vancouver and the Informal Asean Summit in Kuala Lumpur.

They shared the view that the correct response to the regional currency crisis, now into its third month, would be able to accelerate the implementation of the trade liberalisation programme launched by the Apec leaders in Bogor, Indonesia in 1994.

"On these grounds, the president and the prime minister discussed the regional economic turbulence and particularly its impact on Indonesia." Officials said Mr Goh also met Professor Widjojo Nitisastro, the veteran economist assigned by Mr Suharto to coordinate Jakarta's dealings with the IMF. The four-eyes meeting took place shortly before the Indonesian president hosted Mr Goh to lunch.