WASHINGTON-The Indonesian government agreed last week to privatize state-owned telecommunications as part of a new, $43 billion rescue package negotiated with the International Monetary Fund.
Last week’s accord, the third attempt in six months to help the fourth-largest nation avoid total financial collapse, could create new business opportunities for U.S. wireless firms and calm the region’s jittery financial markets overall.
Asia is a major export market for the U.S. wireless industry, but currency destabilization, created in large part by crony capitalism, government corruption and lax banking oversight, has triggered inflation, unemployment and civil unrest.
As such, wireless companies in Asia have suffered losses in recent months.
Indeed, Indonesian President Suharto’s family and associates, who run much of the country’s business and own much of its wealth, have been reluctant to give it up.
“The economic program agreed with the (Indonesian) government adapts macroeconomic policies to the deteriorated economic situation and expands the structural and banking reforms agreed on Jan. 15, 1998,” said Hubert Neiss, director of IMF’s Asia and Pacific Department.
Hubert added, “The main objectives of the program are to stabilize Indonesia’s financial situation and to establish the foundations for a resumption of economic growth.”
The key components of the IMF’s rescue plan for Indonesia are:
A strong monetary policy to ensure stabilization of the rupiah.
Effective control over the budget, with allowance for the temporary fall in economic growth and the need to subsidize basic commodities.
Accelerated bank restructuring to ensure the efficient operation of the financial system.
A comprehensive agenda of structural reforms to increase competition and efficiency in the economy, reinforcing the commitments made in January.
Accelerated arrangements to develop a framework with foreign creditors to restore trade financing and to resolve the issues of corporate debt and interbank credit.
The strengthening of the social safety net through support for small- and medium-sized enterprises and through public-works programs.
Hubert said the credibility of the program depends on its full implementation. This will be accomplished, he said, through daily monitoring by the executive committee of the Resilience Council in cooperation with the IMF, the World Bank and the Asian Development Bank.
The IMF wants to see substantial action by Indonesia before giving final approval of the bailout plan and will conduct periodic reviews to ensure compliance.
The Asian meltdown has given the U.S. leverage in negotiating for open markets in telecommunications. Japan, which has its own economic troubles but has escaped the worst of the contagion, is slowly removing telecom trade barriers.
But not as fast nor as much as the Clinton administration would like from the world’s second-largest economy.
Charlene Barshefsky, U.S. trade representative, said Japan’s new three-year deregulatory program falls short of the mark.
“The new deregulatory program is too vague on key issues and often delays implementation of the important regulatory changes for several years. Comprehensive deregulation is urgently needed to open Japan’s economy to market forces and to significantly improve market access for foreign goods and services.”
Barshefsky noted, “It is critical, for example, that Japan open its telecommunications sector competition through the timely introduction of lower interconnection rates in line with other competitive markets, and consistent with its WTO (World Trade Organization) commitments.”
Efforts to further deregulate telecommunications and other industries in Japan grew out of an initiative announced by President Clinton and Prime Minister Hashimoto last June in Denver.
