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Monday, April 27, 1998
Crisis in Asia: Japan's recovery seen as integral to region
First in a series
Recovery from the economic turmoil sweeping Asia depends very much on how quickly Japan can pull out of its economic doldrums, because Japan's presence in the region's economy is so huge, said a business leader from Indonesia.
"You cannot rely too much on the United States or the European Community, because basically, they don't have too much activity (in Asia)," Kusumo Abujono Martoredjo, chairman-designate of the Indonesian Chamber of Commerce and Industry (KADIN)'s Indonesia-Japan Economic Committee, said in an interview.
According to BKPM, an Indonesian government agency, Japan was the No. 1 investor in Indonesia in 1997, accounting for $5.42 billion, or 16 percent of total foreign direct investment. By comparison, investment by the U.S. was $1.78 billion, or 3 percent.
As Asia's big brother, Japan has to do something, Abujono said, but it seems difficult with the deep economic trouble it has been in for the past seven years. "That's why it is very important for the Japanese to do something for their economy," he said.
Kusumo, who is also president of PT. Catur Yasa, a company dealing in power generators, property development and trading, was in Tokyo over the weekend to attend the Third Asian Neighbors Forum, hosted by the Japan Federation of Economic Organizations (Keidanren), to discuss Asia's economic problems in the wake of last summer's currency devaluations.
Kusumo said Indonesia has implemented reform measures agreed upon with the International Monetary Fund, and the government is now strongly committed to implementing reforms to tackle its current economic crisis. "Since the new Cabinet was formed, we have more committed people," he said. "And the private sector strongly supports it."
The Indonesian government announced last week that it has met some of its IMF-mandated reform targets, including replacing a ban on palm oil exports with an export tax, reducing other types of export taxes and amending a century-old bankruptcy law. It also unveiled a plan to partially privatize seven state-owned companies by next year. "The government is acting ahead of target dates (set by the IMF)," Kusumo said. "For instance, the privatization scheme is supposed to be out by the end of June, but they will be ready to release it by the end of May."
If the IMF agrees with the Jakarta government's appraisal, Indonesia in the near future will receive a second tranche of long-delayed support loans totaling $3 billion. "Nowadays, there are a lot of questions (about) whether the IMF is giving the right remedy to Asia," Kusumo said. "But at least we have some direction of where to go."
Kusumo said the next step is to solve the problem of huge foreign debts owed by Indonesia's private sector, and he urged Japanese companies to launch new economic projects in Indonesia as soon as the issue is settled. "Japanese companies have bad debts in most Asian countries," he said. "And before moving ahead, you have to agree on what to do with all these bad debts."
Following a creditors' meeting in New York earlier this month, another meeting is scheduled to be held in Tokyo next month to help scores of Indonesian companies that are technically bankrupt and unable to make loan payments in foreign currencies because of a sharp fall in the value of the Indonesian rupiah.
The debts are estimated at around $80 billion, which include $12.5 billion owned by state-controlled enterprises. "Some (debts) might be scrapped, some might be turned into equity and some might be rescheduled," Kusumo said. "After we have some sort of settlement, we want (Japanese firms) to go ahead with new projects and real economic activities."
He predicted that Indonesia, South Korea and Thailand -- the three countries that called in the IMF for financial rescues -- will take two to three years to recover.