WORLD BANK DEMANDS INDONESIA RESTORE ORDER IN EAST TIMOR.
The World Bank yesterday demanded that Indonesia restore order in East Timor and permit its transition to an independent nation, saying it was "deeply concerned" by the violent situation there, Agence France-Presse reports. "We are deeply concerned by the violence which has ensued since the results" of last week's referendum in which 78.5 percent of voters favored independence in the former Portuguese colony, the Bank statement said. East Timorese voters "took a brave step in going to the polls, and they deserve to see the results of the ballot implemented in full."
The Bank noted that at July's meeting of the Consultative Group on Indonesia?which pledged $5.9 billion in aid for Indonesia's current fiscal year?Indonesia told donors it was determined to keep to its international agreements on East Timor and support the UN operation there, Reuters adds. "This issue was, and continues to be, of paramount concern to our shareholders who constitute Indonesia's key international partners," the Bank said in the statement. "We join with the IMF and our other partners in supporting a rapid response to the deteriorating security situation, in order that initiatives for economic recovery and poverty reduction may proceed in both Indonesia and East Timor."
The New York Times (p.C4) cites World Bank Deputy Director and Country Program Coordinator in Indonesia, Ben Fisher, as saying, ?We?re terribly concerned and worried about the East Timorese and we?re following the situation closely?For the entire international donor community, this is a very difficult issue.?
The World Bank and the IMF have led a multi-billion dollar loan package for Indonesia to help it restructure its economy and lessen the impact of its economic crisis on the poor, the story says. Indonesian markets have been hit by concerns that loans to Indonesia could be stopped due to international anger over Indonesia's failure to rein in the violence. The rupiah touched 8,500 to the dollar today, before recovering slightly. Stocks were off two percent.
But analysts say that despite veiled threats from the international community, loans are unlikely to be halted. They say the West is unwilling to jeopardize Indonesian political and economic stability, despite their concerns over East Timor. The IMF said yesterday it was reviewing whether to go ahead with a planned mid-September visit to Indonesia, which must precede the next disbursement of IMF funds. Suspending financial assistance to Indonesia could worsen an already severe economic crisis in a country of 200 million people, the Financial Times (p.4) also reports.
Meanwhile, ignoring threats of international intervention, anti-independence militiamen in East Timor attacked the UN compound in Baukau yesterday, forcing the UN staff and a prominent Roman Catholic bishop to flee, reports the Los Angeles Times (p.A4). UN staffers said that as many as 200,000 people were displaced in East Timor and that humanitarian agencies were unable to provide help because of the perilous security situation.
Further, a US State Department spokesman, James P. Rubin, said yesterday that ?productive relations between Indonesia and the international community, including the IMF, depend on Indonesia adopting a constructive approach towards ending the humanitarian disaster in East Timor, say the Washington Post (p.A19) and the New York Times (p.A10).
In related news, international investors in Indonesia say the turmoil has added to a string of problems that threaten the country?s recovery and transition to democracy. With the government adrift and banking reforms dashed by a corruption scandal, corporate investors worry Indonesia may be sliding back into crisis after a brief bout of optimism this spring, reports the Wall Street Journal (p.A22). And any economic sanctions would jeopardize hopes for the recovery here that foreign nations have worked so desperately to foster.
However, notes the Guardian (p.4), the power of the purse strings cannot be underestimated. By March this year, the World Bank?s lending to Indonesia reached $25 billion, of which $19.8 billion had already been advanced. Under its current president, James Wolfensohn, the Bank has sought to use Indonesia as a test bed for new standards of good governance and transparency. Although in the past it has been widely criticized for helping to prop up authoritarian and corrupt regimes through generous loan programs, it is now as likely to halt programs in response to the complaints of protesters or NGOs.
This means, says the story, that in effect both the IMF and the World Bank ought to be very sensitive to the present standoff in East Timor and be prepared to freeze, if not halt, lending on the grounds that the money could easily be re-deployed to pay the militias and security forces responsible for the bloodshed in East Timor.
Commenting in a leader, the FT (p.11) says pulling the plug would cause serious damage to Indonesia. At the same time, however, Jakarta should remember that the IMF?s major Western shareholders have difficulty justifying loans to countries condoning mass murder.
The news comes as AFP reports that the Indonesian government has asked donor countries to reschedule some $6 billion of debt due in 2000 to a new payment date of 2002, Coordinating Minister for the Economy Ginanjar Kartasasmita said yesterday. "We have been trying to seek approval for this. And we have asked the US government and also the IMF to help to discuss the matter," Ginanjar said. "So, we hope that US Treasury Secretary Lawrence Summers will coordinate with the IMF, the G7, and the chairman of the Paris Club. Let's wait for the outcome."
Analysts are skeptical, however, that the Paris Club would grant another debt rescheduling facility to the administration of President B. J. Habibie amid signs of slowness and lack of seriousness in resolving the Bank Bali scandal and the East Timor problem, the Jakarta Post (p.9) reports. The IMF and the World Bank have repeatedly warned Habibie to satisfactorily resolve the bank scandal or budgetary support would be stopped, the story notes.