JAKARTA, Sunday 2 Nov. 1997 - Economists and business executives expressed disappointment yesterday that the International Monetary Fund did not include the scrapping of the controversial Indonesian national car project on its list of conditions for a rescue package, saying that the IMF lacked the courage to attack the politically well-connected project.
Analyst Christianto Wibisono of the Indonesian Business Data Center said the car project has became a symbol of nepotism and anti-market tendencies in Indonesia, adding that it deserves to be abandoned more than any other state-sponsored project.
Economist Faisal Basri of the University of Indonesia said the exclusion had created an image that the IMF-led reform effort does not touch on the basic fact that the Indonesian economy should be managed professionally and purged of favouritism.
Critics like Basri and Wibisono had earlier urged the IMF to scrap the car project on the grounds that it had drained Indonesia's foreign reserves, contradicted government policies on taxation and import tariffs and had nothing to do with Indonesian nationals.
It was reported yesterday that President Suharto's son, Hutomo Mandala Putra, had been replaced as president of the carmaker PT Timor Putra Nasional, although officials denied the move was linked to the IMF package.
Unconfirmed reports said that PT Timor Putra Nasional is to be merged with PT Astra International, one of the biggest Indonesian automobile assemblers, whose major shareholder is a group of foundations under the chairmanship of Suharto.
A consortium of nine state-owned and private banks, which include Bank BNI, the biggest state-owned bank, and tycoon Liem Sioe Liong's Bank Central Asia, had earlier this year agreed to give a US$690 million syndicated loan to PT Timor Putra Nasional.
The car programme is now being scrutinised by a World Trade Organisation panel in Geneva because of complaints lodged by Japan, the European Union and the United States accusing it of being discriminative and violating WTO rules.
Economist Kwik Kian Gie, who is also a close aide to opposition leader Megawati Sukarnoputri, said the car project could be shelved without an IMF demand because Indonesia might lose in the WTO case.
Kwik added that South Korea's Kia Motors, the Seoul-based parent company of PT Timor Putra Nasional, has already gone bankrupt and Timor cars are not selling well in Indonesia.
"Those banks that committed $690 million face a force majeure because of a liquidity problem and the rupiah's depreciation," Kwik said, adding that the IMF, however, should still include the car project on its blacklist as a matter of principle.
The value of the Indonesian rupiah has decreased by about 35 per cent to the US dollar since Thailand floated the baht on July 2. Before the de facto baht devaluation, the Indonesian currency stood at about 3,300 rupiahs to the dollar but nose-dived to 4,100 to the greenback in mid- September. Now it runs at between 3,800 and 3,900 to the US currency.
State Secretary Moerdiono said on Friday when announcing the IMF-led reform package that the fundamental objective of all these various measures was to improve the overall efficiency and competitiveness of the Indonesian economy.