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Indonesia faces problem absorbing foreign funds

AsiaPulse via COMTEX

24th September, 2001

Indonesia's Coordinating Minister for Economic Affairs Dorodjatun Kuntjoro-Jakti has noted that Indonesia is facing a problem in absorbing foreign financial assistance, both in the form of soft or hard cash. "One of the reasons is that we have to expend cash to accompany the (US) dollar," he told newsmen here at the weekend while explaining the results of the meeting among Indonesian President Megawati Soekarnoputri, World Bank President James D Wolfensohn, and US Treasury Secretary Paul O'Neill.

The meeting was a follow-up to US President George W Bush's commitment to draw up a financial assistance package for Indonesia. During their meeting here Wednesday morning, Bush promised Megawati a total of US$657.4 million in financial aid as well as the restoration of military aid. Some $400 million will be aimed at promoting trade and investment in the oil and gas sector. "Thus about the aid, it would depend on our capability to absorb it. The $400 million fund would relatively be much easier to absorb than the $1 billion fund," Dorodjatun said. Besides, he added, the fluctuation of the rupiah highly depends on the US dollar. He reminded that the rate of the greenback against the Japanese yen and the euro is getting bullish, following the Sept 11 terrorist attacks on the World Trade Center in New York and the Pentagon near Washington DC, with the US economy losing investor and consumer confidence.

Dorodjatun however refuted opinions saying that the decreasing exchange rate of the rupiah is due to market sentiments following the US' plan to send warships to the Middle East. "The decrease of the rupiah against the US dollar is merely due to the strong relations between our rupiah and US dollar compared to other currencies. Thus if there is a dollar fluctuation against the yen and the euro, our rupiah will also be shaken," he said. Megawati and her entourage will leave for Houston on Friday to address an energy conference, and then travel to New York to attend several meetings at the United Nations headquarters as well as hold a meeting with US Secretary General Kofi Annan. (ANTARA) _(C) 2001 Asia Pulse Pte Ltd.