Pidato CGI 4 (Dalam Bahasa Inggris)

8/14/2014 Pidato CGI 4 (dalam bahasa Inggris) Forum Kwik Kian Gie Mari Kita Berdiskusi
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MENTERI NEGARA PERENCANAAN PEMBANGUNAN NASIONAL/KEPALA BAPPENAS
ADDRESS AT THE PRE-CGI MEETING
Jakarta, 10 December 2003
State Minister for National Development Planning/
Head of Bappenas
Your Excellencies,
Ladies and Gentlemen,
As stated in the agenda of todays Policy Dialogue of the Working Group, I should be talking about Aid
Effectiveness. As far as I can recall, each year we have been discussing aid effectiveness. Thus in 2002, I
had presented my views on this topic at the Pre-CGI-Meeting, of which the written copy has been
distributed today because I have not yet changed my stance since then.
Thereby, today I would like to touch on other aspects, that are nevertheless not unrelated to the
effectiveness of foreign debt utilization.
Foreign debt that has continually been given to Indonesia, has evidently resulted in the greater
dependence of Indonesia on creditor nations and international financial institutions. One of the forms
of such dependence is the continued falling apart of the Indonesian government finances
Why? Because that dependence has continued to worsen since requesting the IMF to assist Indonesia to
face the confidence crisis in 1997. It was not foreseen then that the IMF will force its will in such an
illogical and unfair manner.
What does that imply to me ? Indeed many. If I had to bring out all of such implications, it would have
taken us the whole day. Therefore let me bring out just a few of those implications.
First, the most visible is the scope of its intervention. My staff has compiled a summary of all of the
Memorandums of Economic and Financial Policies (MEFP), that have also been referred to as the Letter
of Intent (LoI), that contains the measures that must be taken by the government of Indonesia. Until
the LOI of 11 June 2002, there have been a total of 1,243 measures pertaining to banking, debt,
decentralization, the environment, fiscal, foreign trade, deregulation, loans and asset recovery,
monetary policy, privatization of State Owned Enterprises, social safety net, etc. I am asking myself
whether the IMF as a monetary institution is justified to interfere in almost all aspects of life of this
nation that in fact is an independent and sovereign state.
They obviously are unjustified. But such are the facts. The public finance of nations such as Indonesia
have by design been made bankrupt. Thus by becoming financially dependent, Indonesia has fallen
fully at the mercy of creditor nations and international financial institutions, like the practice of
cartels. In the book authored by John Pilger and also in his documentary film, entitled The New Rulers
of the World, Pilger says among others that:
In this world, unseen by most of us in the global north, a sophisticated system of plunder has forced
more than ninety countries into structural adjustment programmes since the eighties, widening the
divide between rich and poor as never before. This is known as nation building and good governance
by the quad dominating the World Trade Organisation (the United States, Europe, Canada and
Japan) and the Washington triumvirate (the World Bank, the IMF and the US Treasury) that control
even minutes aspects of government policy in developing countries. Their power derives largely from an
unrepayable debt that forces the poorest countries to pay $ 100 million to western creditors every day.
The result is a world where an elite of fewer than a billion people controls 80 % of humanitys wealth.
Excellencies,
That was written by John Pilger, an Australian reporter, who lives in London, whom I do not know, so
that there has never been any communications between me and John Pilger. There are nevertheless
several words that in my opinion apply to Indonesia and are relevant with what I have just said,
namely John Pilger words that :
Their power derives largely from an unrepayable debt that forces the poorest countres. and so forth.
In the case of Indonesia, the government finance has already become bankrupt in 1967, at least that is
what has been described by the New Order technocrat economists, who had been confided by President
Soeharto to hold the reign of leadership on economic issues. Thus John Pilger also said among others the
following, as quoted from page 37: In November 1967, following the capture of the greatest price, the
booty was handed out. The Time-Life Corporation sponsored an extraordinary conference in Geneva
which, in the course of three days, designed the corporate take-over of Indonesia. The participants
included the most powerful capitalists in the world, the likes of David Rockefeller. All the corporate
giants of the West were represented : the major oil companies and banks, General Motors, Imperial
Chemical Industries, British Leyland, British American Tobacco, American Express, Siemens,
Goodyear, the International Paper Corporation, US Steel. Across the table were Suhartos men, whom
Rockefeller called Indonesias top economic team.
To carry out all that, Indonesian sons were needed. On page 38, John Pilger describes the following
atmosphere in Geneva : : In Geneva, the Sultans team were known as the Berkeley Mafia , as several
had enjoyed US government scholarships at the University of California at Berkeley. They came as
supplicants and duly sang for the supper. Listing the principal selling points of his country and its
people, the Sultan offered . abundance of cheap labour . a treasure house of resources .. vast
potential market.
Page 39 says that : On the second day, the Indonesian economy was carved up, sector by sector. This was
done in the most spectacular way , said Jeffry Winters, professor at Northwestern University, Chicago,
who, with doctoral student Brad Sampson, has studied the conference papers. They divided up into five
different sections : mining in one room, services in another, light industry in another, banking and
finance in another; and what Chase Manhattan did was sit with a delegation and hammer out policies
that were going to be acceptable to them and other investors. You had these big corporate people going
around the table, saying this is what wee need : this, this and this, and they basically designed the legal
infrastructure for investment in Indonesia. I have never heard of a situation like this where global
capital sits down with the representatives of a supposedly sovereign state and hammers out the
conditions of their own entry into that country.
The Freeport Company got a mountain of copper in West Papua (Henry Kissinger is currently on the
board). An American and European consortium got West Papuas nickel. The giant Alcoa company got
the biggest slice of Indonesias bauxite. A group of American, Japanese and French companies got the
tropical forests of Sumatra, West Papua and Kalimantan. A Foreign Investment Law, hurried on to the
statutes by Soeharto, made this plunder tax free for at least five years. Real, and secret, control of the
Indonesian economy passed to the Inter-Governmental Group on Indonesia (IGGI), whose principal
members were the US, Canada, Europe, Australia and, most importantly, the International Monetary
Fund and the World Bank.
Once again Ladies and Gentlemen, those are the words of John Pilger, whom I do not happen to know.
If we believe in John Pilger, Brad Sampson and Jeffry Winters, then since 1967 Indonesia has already
been plundered at the guidance of the nations own elite that were in power at that time.
Thereafter until the breakout of the economic crisis in 1997 that was subsequently followed by the hard
hitting depression, the monetary situation and the confidence situation became in disarray. The
Rupiah depreciated from Rp 2,400 per US dollar to Rp 16,000 per US dollar. The confidence of the world
as well as of Indonesias business community fell to its lowest level. Under such condition, as a member
of the IMF, Indonesia had used its right to asks for the IMF assistance, that was granted in the form of
Standby Arrangement, and then the Extended Fund Facility. It was at that time announced to the
world that the IMF has given a pledged assistance of US$ 43 billion. It is meant as a breakthrough
measure to restore confidence. The Indonesian people had not yet known on the form of such assistance.
Only some time thereafter was it revealed that the assistance is given in piecemeal portions, namely
after the Indonesian government has completed work programs that are to be stated in the respective
Letter of Intent. Therefore, the total pledged amount of US$ 43 billion has never been realized.
Indonesias foreign exchange reserves that in 1997 amounted to US$ 14.7 billion has continued to rise by
Indonesias own effort to around US$ 25 billion. Meanwhile, from the IMF disbursements each time a
LOI has been completed, will in its accumulated total reach US$ 9 billion at the end of this year, when
Indonesias relation with the IMF in the form of the Extended Fund Facility will end.
Are all of the recipes that have been forced to the Indonesian government from one LOI to another, been
sound ? In my opinion and in the opinion of many other economists, including Joseph Stiglitz, they are
not. There are many mistakes and blunders that can be pinpointed, but I will start with two grand
policies that have brought extraordinary disaster to the Indonesian economy.
If the description of John Pilger shows that the plundering process has started in 1967, then by 1996
what seemed like successes from the outside, must have actually been internal decay. With the
involvement of the IMF in 1998, the Indonesian economy was again being pilferaged in a shorter time
span.
There are two serious losses that have been forced by the IMF to Indonesia for overcoming the rampant
recession. The first is the forced super tight monetary policy that imposes a interest rate increases to
40% to 60% for a duration of almost one year. In my opinion (that according to the IMF is certainly
considered as stupid), this is one of the important causes of the slow economic recovery in Indonesia
compared with other ASEAN nations.
The second policy that have brought about serious damage is the forcing of the Indonesian government
to liquidate 16 banks without preparations, that have resulted in a series of events that have wrought
havoc to domestic banking. The IMF ordered the government to inject funds to national banks, that
could no longer function soundly due to being plundered by their owners, with recapitalization bonds
amounting to Rp 430 trillion with the interest payment obligation of Rp 600 trillion. The Indonesian
government was also forced to sell banks within a particular period and to have it announced to the
world so that such banks can only be sold at a very low price, such as Bank Central Asia. The details
thereto have already been brought up in various books that are distributed to this forum.
There are still many other mistakes and blunders that have been imposed by the IMF to us, such as the
Master Setllement of Sales and Acquisition Agreement (MSAA), the granting of the Release and
Discharge provision. But today I will focus on debt and its effectiveness.
The loans granted by the CGI to Indonesia have clearly not been effective. What are the criteria on
effectiveness of the debts? A debt can claim to be effective only if it can be repaid from the proceeds of
the project being funded by it. It has already been proven that after the 35 years of incessant granting
of loans, and in the 32 years of the Soeharto government with an average economic growth rate of 7%
per year, the debt cannot for some time be repaid from the government revenues that are generated
from the invested debts. Already for some time prior to 1999 has debts that have become due been
repaid by obtaining new debts. Since 1999, however, such method has no longer been effective.
Therefore, for the first time in 1999 Indonesia had to ask for the rescheduling of its amortization
payments. This is likewise the case for debt becoming due in 2000 and in 2002.
Thus the loans granted for 32 years to an economy that has grown at an average of 7% per year, can
evidently not be repaid including the inability to pay its due interests. Repayment can be made only by
liquidating assets of the state. If so, then what is the point of linking total debt to the GDP, if it is
already obvious that the continued increase of the GDP has not been able to generate income for
repaying the debts and interests on time ? Is it only to make it look to have been declining ?
As I have said in the speech of the previous CGI meeting, debt can be paid only through the liquidation
of assets. I said then that one just have to imagine a businessman that obtains a loan for the
construction of a plant. When the time came to pay the debt, the debt repayment can be made only by
selling his plant at a huge loss, that is referred to as at a low recovery rate. Our businessman then again
obtains a loan for constructing a second plant. When the loan becomes due, it again becomes evident
that it can be repaid only by selling his plant at a low recovery rate. You, as is the case with me, will
naturally think that the said businessman is insane. But you all agree that the IMF forces the
government of Indonesia to carry out the same thing in the process of government debt repayment.
Thus not only is the CGI debt not effective, but the government is ordered to carry out the same insane
steps in the handling of Indonesias debts.
If I am being so critical of the debts from the CGI, would it mean that I believe that the CGI should be no
more, and that this year there is no need to obtain additional debt ? This is not so at all. Not that I am
being inconsistent in my dislike to debts that are obtained in an uncontrolled manner without limit,
but because the debts that have already reached such huge amount has made it impossible for the
government not to continue obtaining debts in order to maintain its governing operations and to carry
out the least possible development activities.
Let us have a look at the figures of the 2004 state budget. I have presented the figures of the 2004
budget in a Table that has also been distibuted to you, in a format that I myself have compiled in order
that it can be understood by everyone.
The Table shows that the interest payments of domestic debts amount to Rp 42.3 trillion, and for
foreign debt is Rp 24.4 trillion. For interest payments alone the total amount is Rp 65.7 trillion.
Amortization payments for domestic debt amounts to Rp 21.2 trillion and for foreign debt is Rp 44.4
trillion. Thus the total of amortization payments amounts to Rp 65.5 trillion. The total debt payment
obligations thereby amounts to Rp 131.2 trillion.
Debt and interest payments already constitute 92.67% of the total of development budegt allocation of
Rp 70.9 trillion. In terms of the total debt payment obligations, the amount represents 185% of the
total of development budget. It is thus obvious that we have to obtain new debt and it seems that this
trend will continue in the coming years, unless there is a strong will to drastically reduce it.
With such huge debt obligations, what do we have to sacrifice ? Let us look at the major sectors of
government expenditures.
The education sector has obtained the highest allocation from the development budget, namely Rp
15.34 trillion. This is only 23.35% of the total interest payments that we must pay. If amortization
payments are added, then that proportion remains only at 11.7%.
The condition of the TNI/Polri (Armed and Police Forces) is very apprehensive in terms of their
weaponry and for maintaining the physical well being of their members. Not so long ago we have been
humiliated above our own soil by 5 US Hornet planes that have encircled and locked in 2 of our F-16
planes. These are the only two ones that we have. When we endeavored to purchase new ones that are
far less costly from Russia, namely Sukhoi planes, we do not have the money, thus we have to become
acrobats through the counter-purchase mechanism that have given rise to still other problems. In
defending the NKRI (Unitary State of the Republic of Indonesia) and for fighting terrorism, the budget
allocation for defense and security has been increased to Rp 10.72 trillion, so as to become the second
largest after the education sector. What a contrasting figure if expressed as a percentage of our debt
interest payments. It will amount to only 16.3%.
Our infrastructure has become dilapidated. There is no day without a rail-track being broken. yet the
development budget allocation for the land transportation sub-sector is only Rp 1.83 trillion, which is
only 2.79% of the total debt interest payments. If we include amortization payment obligations, then
the land transportation sub-sector development budget allocation is only 1.39% of all payments related
to debt. This budget allocation comprises various aspects of land transportation, among others railways
that are in very poor shape.
A look at the funds available for assisting the 40 million people that are poor so that they will not
become seriously ill or die, if compared to the total amount for debt interest and amortization
payments, the allocation becomes even more apprehensive. The government has designed around 54
programs that are carried out by various ministries in 15 sectors. The total amounts to Rp 12 trillion.
This is only 16.935 of the total development expenditures. Spending for interest and amortization
payments is 185% of the total development expenditures.
Payment obligations for the Banking Recap Bonds that have constantly worry many have now become
factual figures in dreadful magnitudes. Could our public finance survive for 2005 and beyond if we
remain conventional ? Do those claiming that our fiscal situation has become sustainable even though
our Recap Bonds obligations have reached terrifying amounts ? Such Recap Bond payment obligations
will continue until who knows when. All suggested ways for alleviating the problem have been ignored
by the IMF and the Economic Team. The question is: how many persons are benefiting from such huge
Recap Bond payments burden ? As mentioned above, the population below the poverty line totals 40
million persons.
While doing all that, we have no choice but to get new loans each year at the CGI forum. This is what I
mean by the too huge debt forcing us to make new debts. We are in fact already in a debt trap.
We now can see just to what lengths the government of Indonesia has to endeavor in 2004.
Routine revenues are insufficient. As shown in the Table, on top of the routine revenues we must
endeavor the following: deplete government deposits amounting to Rp 19.2 trillion, sell state owned
enterprises in the amount of Rp 5 trillion, sell IBRA assets in the amount of Rp 5 trillion, make new
borrowings from the Indonesian people amounting to Rp 32.5 trillion. Obtain program loans amounting
to Rp 8.5 trillion and project loans amounting to Rp 19.7 trillion. A grand total of Rp 88.9 trillion. The
last two items are mostly obtained from the CGI and from international financial institutions.
It has thus become evident that incessant loans from the CGI plus the loans made for covering the large
gap in the banks, have left us no choice but to further obtain new loans.
The CGI creditor nations and the international financial institutions have on the one hand exhibited a
stance of being tight while they clearly are imposing on us their credits. On the one hand wanting to
offer credits as pure lenders do, while on the other hand pretending to provide assistance to the
Indonesian people.
The Indonesian people does not need assistance. A borrowing country does indeed need credits but the
creditor also needs to gain from interest income. They both need each other, so that it does not make
sense and it is unfair to place the debtor in a subordinate position. An example is when Bappenas said
that it wants to make stringent efforts to cancel projects that have not yet been started even though the
credit agreements have already for some quite some time been signed, whereupon creditors hurriedly
said that the effective period of the credit agreements can still be extended.
When concerning their refusal to allow Indonesia to reschedule payments and that Indonesia is not
eligible for haircuts, etc., creditors have already acted unfairly to the Indonesian government. They
have suggested, and in fact have forced Indonesia to carry out large scale restructuring steps to debts of
conglomerates that have obviously acted in bad faith. But they themselves have become reluctant to
allow the government of Indonesia to reschedule the repayment of debts that have become due. They
very well know that good corporate governance that they have been teaching implies the need to closely
assess the ability of borrowers to repay its loan and the interest payments exactly on time. Should they
misjudge the capability of the borrower then they will also have to bear part of the ensuing loss. This is
called a haircut. That is why that there are no banks and no company that extends a supplier credit
without making a loan loss provision for troubled and non performing loans. It is from such loan loss
provisions that banks can cover losses attributed to failure of borrowers to make repayments. On the
other hand, they have refused to apply such principle that they have deemed as being prudent to the
public sector. John Pilger probably was right when he said that we are indeed being coerced and
exploited by rich nations with the power that (I quote) derives largely from an unrepayable debt.
Not only have foreign creditors taught Indonesia the principle of having to share the losses of non
performing loans due to miss-judgement (in assessing ability to repay), they have even forced the
government to cover the financial shortages of banks, attributed to having been misused by the owners
themselves, by issuing recap bonds (RB), while the creditors themselves have treated the government of
Indonesia in the opposite manner. They have taught us not to form cartels or to create monopolistic
conditions, but they themselves have formed a cartel comprising the CGI, World Bank, the Asian
Development Bank, the Paris Club, and the London Club under the auspices of the IMF. Their behavior
and attitude in Paris Club negotiations have clearly been like cartels. The creditors are in one room
while the government of Indonesia in another room. There must not be any contacts unless via a
mediator. This is meant to ensure that all creditor nations maintain their cohesiveness and for
averting competition among them in facing Indonesia, namely to make each of them equally tough.
Here again are examples of asymmetric behavior and the use of double standards that are suited to
their own interests.
Let us now look at the way of settling large corporate debts that have arisen by these corporations
having abused funds of their own banks. The solution that has been fully supported and approved by
the IMF is that they sign an agreement referred to as the Master of Settlement and Acquisition
Agreement (MSAA). What are the contents of the MSAA ? Criminal violations that have been clearly
stipulated in the Law on Banking with regard to the legal lending limit has been blatantly violated.
And yet a release and discharge have been given for such criminal deeds, so long as they can meet the
condition of repaying their debt by assets, the sales value of which is actually just 15% to 20% of their
total debt.
Who in the world could have designed such a nonsensical agreement ? The answer is a very young
American lawyer. When reminded by a senior Indonesian lawyer whose intelligence and knowledge are
in no doubt, that the MSAA is a civil agreement that cannot possibly ignore penal violation articles in
the law on banking. Alas, the young foreign lawyer arrogantly replied: Then you change your law. The
attitude of foreign experts, employed at international institutions as well as consultants and
accountants in Indonesia, has indeed been a priori that Indonesian academicians must be less
intelligent then they are. This does not pertain to the MSAA but also relate to many other matters.
So it is not surprising that Joseph Stiglitz in his latest book entitled The Roaring Nineties on page 23
says among others that : The economists and development experts of the Third World, many of them
brilliant and highly educated, were sometimes treated like children.
Who is to blame ? Obviously the leaders of Indonesia itself, past as well as that are currently in power.
Why just meekly follow ? Why have they not been acting as true leaders of a nation that is independent
and sovereign, while in their time, the leader of the Indonesian nation, Soekarno and those of his
generation, have given such independence and sovereignty ? This is indeed a puzzle for many including
myself. Why so? Could it be that they have not understood matters that are unfair and have already
seriously damage our economy, or could it be that they have interests ? What are their interests ? I
honestly do not know.
How to get out of this burdensome mess? Most importantly, our leaders must be able to free themselves
from the Inlander complex (a servitude attitude inherited from the Dutch colonial period). They
must become thoroughly conscience that Indonesia has already been independent and sovereign for 58
years. In terms of technocratic requirements, there is actually a large number of experts among
Indonesians who are more intelligent and better educated than the foreign experts that have been
employed in Indonesia. On top of it all, our own Indonesian leaders and experts obviously are better in
terms of local knowledge.
Hence, it is necessary that we begin to ask ourselves why we need the representative offices of the World
Bank, Asian Development Bank and the IMF in Indonesia after their presence here for so long ? Why do
we need the CGI ? And if the presence of the CGI is deemed efficient because it can simultaneously
handle Indonesias loans from many lending nations, why should the leader be the World Bank and not
Indonesia herself ?
With regard to the wish of some parties that wants to have the continued presence of the IMF in
Indonesia in the form of the Post Program Monitoring scheme, I want to say that we should have fully
repaid the remaining loan of US$ 9 billion right now.
For me, the rationale that if we make such full repayment, international confidence will collapse
because our foreign exchange reserves would then drop from US$ 34 billion to US$ 25 billion is purely
whitewash.
My counter-argument that I have brought forward in cabinet sessions and in other forums is that the
US$ 9 billion cannot be used at all before our own US$ 25 billion has been completely used up, so that we
cannot say that our foreign exchange reserves total US$ 34 billion. What we should say is that our
foreign exchange reserves that in 1997 totaled US$ 14.7 billion has continued to increase due to our own
endeavor so that it now has reached US$ 25 billion.
With regard to international confidence that allegedly will be disrupted, le us look at the pattern that
has maintained the remaining IMF loan of US$ 9 billion. As is known, this debt is a second line of
defense that can be used only if the foreign exchange reserves has become completely depleted. I have
already mentioned that the pattern of the IMF loan disbursement is determined by the IMF with the
balance of outstanding loan reaching US$ 3 billion in 2007. In order to be able to use the IMF loan as
balance of payment support, we must first deplete our own foreign exchange reserves. Lets say that our
foreign exchange reserves will continue to fall each month and becomes completely depleted by 2007.
According to the loan disbursement pattern that has been determined by the IMF, by the end of 2007,
when (as assumed only) our foreign exchange reserves had reached nil, then the remaining IMF loan
that can be used becomes US$ 3 billion. So that what we will announce to the world then is : Behold
world community, we have completely depleted our foreign exchange reserves, but fortunately there is
still the balance of IMF loan of US$ 3 billion. Would not description of Indonesias foreign exchange
reserves that totals the US$ 3 billion that in fact is from the IMF loan, completely destroy international
confidence for us?
Each time that I have brought up this argument, neither respond nor frontal objection has been given.
They seemed to listen, but then they brushed away as if I have never forwarded such argument, by then
repeating the old theme if the US$ 9 billion is fully repaid, then the foreign exchange reserves will
drop from US$ 34 billion to US$ 25 billion and thereby will lead to the collapse of the international
community confidence.
Can you imagine, we are not permitted to use the IMF loan, but we are charged an interest of around 4%
each year. Per end of 2002 the interest payments that we have made has already totaled US$ 1.75
billion. On this point, Bank Indonesia officials have pointed out their disagreement. They argued that
the interest rate is only 2.3% and Bank Indonesia has utilized the loan at a rate of 2.6% thus yielding a
net profit of 0.3%. I have asked for a working paper that can explain such interest rate. They promised
but have never delivered it.
On the other hand, from statistical data of Bank Indonesia itself one can compile when we have received
the loan and how much, when we will make principal repayments and when we have to make interest
payments and how much. From such exercise, one can derive the average interest rate. I have asked a
university lecturer who is expert in financial computations from STIE IBII to compute the interest rate
on the basis of that table. I have also asked the Bappenas staff and staff of a Triple A company to
compute it. All have yielded an interest rate of around 4%.
Things are becoming more clear when it was once said that the interest rate for the IMF loan of 4% is
incredibly low. I stated that 4% is not low. If we are to deposit our money in the form of US dollar
deposits at any bank, then the interest rate that we will obtain is less than 1% per annum.
On the technical side, namely that our foreign debt has clearly become too burdensome for the
government budget, there must be the courage to argue as I have stated above. This is to be manifested
in the courage to unilaterally not pay the principal and interest that have become due exactly as
scheduled but to make such payments in accordance with our own capability.
On domestic debt, there must be the courage to withdraw Recap Bonds that have not yet been sold to
private parties and that are still owned by banks that are still under the majority ownership of the
government.
The various alternative methods have been clearly expounded by an Independent Study Team and
their ideas have already been socialized through the publication of the book on the results of the study
that has also been distributed in this forum. However all of the alternative concept have been rejected.
What is the consequence ? Interest payments are made to banks that hold Recap Bonds. Such interest
income are then used by the banks to purchase Bank Indonesia Certificates (SBIs) that in turn generate
to the banks more interest income that are paid by the Indonesian people in a second round, even
though this time by Bank Indonesia. Have the banks become healthy ? After for 4 years earning such
interest income, banks have indeed shown profits in the monthly statements. The major portion of such
profit is actually attributed to the Recap Bonds interest incomes that are received from the
government. What else would it be if not a subsidy ? It involves a fantastic amount, around Rp 40
trillion per year. Such subsidy to the banks has been forced by the IMF, while the IMF had demanded
that subsidies for oil, telephone and electricity be abolished.
Has the banks truly become healthy ? Yes they claim because all of the banks have recorded profits.
Let us look at Table 2 that I have already distributed to you. Per 31 December 2002, all banks have
indeed recorded profits. But if interest subsidy from the government is excluded, then all of these banks
will record large losses. This has gone on for four years.
Heads of banks seem to be demonstrating their managerial capability in attaining profits. I do not know
as to whether Bank Indonesia, the Ministry of Finance, the IMF, the World Bank and the Asian
Development Bank have also deemed that these recap banks have already become truly healthy. Such
false image has to be digested by the Indonesian people as being the truth, while it is the Indonesian
people that actually are financing it through their tax payments.
The senseless and actually avoidable policies made our public finance become very untenable.
The question again arises, do the smart persons at the international financial institutions not
understand, or are they using these instruments to bring Indonesia even in a deeper debt trap, so as to
result in what John Pilger said as, to strangle and control through the power that derives largely from
an unrepayable debt ?
Excellencies,
I am aware that through time Bappenas will become irrelevant at CGI meetings. I accept this new
position, so that I was not permitted to attend and deliver a speech before members of the delegation of
the actual CGI meeting and that I am only permitted to attend the Pre-CGI meeting, the audience of
which are voluntary and are divided into three working groups. I am also aware that in conversations
among diplomats of CGI member countries, they have suggested each other not to waste their time in
talking with me, because I have already become marginalized, and they believe also by my own
President. Therefore, I had already decided not to attend at all. My colleages at the Bappenas persuaded
me to deliver a speech at the Pre-CGI meeting of today on the agenda item called Policy Dialogue.
However, Ladies and Gentlemen, it is indeed true that I am not relevant. Thus do not feel perturbed
with the contents of my address. This is because the contents of this address will have no impact at all to
your positions. Its impact is only to the public finance situation that will become even more
dysfunctional to Indonesias national development in the years ahead.
Thank you.

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