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only serves (in the words of a Jakarta Post editorial) to "lay bare the technical and political incompetence of the government in managing the implementation of reform." In remarks made in NY on April 13, Minister of Defense Juwono Sudarsono, made the comment that he expects Gus Dur to continue as President following the August People's Assembly (MPR) session but its theoretically possible that the MPR could vote to reject the President's accountability speech, constituting a kind of no-confidence vote that would lead to his resignation.  As an explanation for Gus Dur's lack of temerity in replacing Cabinet members this certainly makes sense.  But, couldn't the cycle that led to the October '99 coalition be repeated, leaving Indonesia without a clear roadmap for implementing reform.  Shouldn't Gus Dur take the political risk to demand that his all his ministers be on the same page publicly?  Hopefully, he will soon establish that only the DPR and MPR are political institutions and that his Cabinet is his Administration's unified instrument for policy implementation not another place for multiple personalities.  Until he does so, gridlock could well remain.

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BANKING AND FINANCE

John Dodsworth, IMF's Senior Representative for Indonesia gave his assessment of Indonesia's recovery for a March, 2000 AMCHAM luncheon in Jakarta. The following is a summary of his main points.

	Its wrong to argue that crisis countries did not suffer from structural reforms but only had temporary liquidity problems.  The growth rates of the 1990's masked the true state of over-leveraging and misallocation of resources.
	Vested interests resist change through many weapons at their disposal, stressing Indonesia's newly elected government.
	Indonesia missed the initial opportunity for structural economic change but the crisis did produce profound political change.
	This year's growth may exceed predictions-- but the government should not be misled--at this stage, the growth is consumption-led from a low base.
	The government must resist the tempting argument of vested interests that they were the victims and not the cause of the crisis and that just ensuring them access to credit will bring back growth and employment.
	Fundamental changes to the tax and legal system (including the investigation of corrupt lending practices) are needed to overcome the main obstacles to broadening the recovery which are: lack of functioning banking sector; large un-restructured private corporate debt; lack of confidence in public institutions, including the court system; lack of available capital.
	Flight capital from foreign not just Indonesian sources will be essential to fuel a sustained recovery.
	IBRA must be able to act independently (with appropriate monitoring).

Reprinted from AMCHAM Indonesia April Newsletter

INDONESIA DEBT ROLLOVER SIGNALS ECONOMIC REBOUND
JAKARTA, April 14 Asia Pulse/Antara - Indonesia's securing a rollover of its debt from the government's Paris Club creditors is a signal that the economy is on the rebound, according to economists. "If the economic team works more seriously the Paris Club success could start a snow ball effect, speeding up economic recovery, Sri Adiningsih of the state Gajah Mada University said yesterday. The Paris Club, including France, the United States, Britain and others agreed to reschedule US$5.8 billion of Indonesia's debt maturing by March 31, 2002. The amount exceeds US$2.1 billion expected by the country to maintain its state budget. The government has included the US$2.1 billion in calculating its state budget for the nine-month fiscal year starting April. The success was only a minor phase of "homework" that includes solving problems over demand for pay rises, fuel price rises and slow bank restructuring, Adiningsih said. She said the result of the Paris Club meeting would boost the market, as the pressure on the state budget would ease at least in the next two years. She said, however, rescheduling could mean a surge in the debt service ratio in the future when repayment is due.

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