Christine T. Tjandraningsih, Jakarta – As part of its efforts to implement a new package of economic reforms recommended by the International Monetary Fund (IMF), the Indonesian government will announce several new measures in the next few weeks, according to a draft Indonesia-IMF memorandum.

In the "Supplementary Memorandum of Economic and Financial Policies" agreed with the IMF this week, the government expressed a commitment to eliminate restrictions on foreign investment in wholesale trade by April 22.

"The government remains fully committed to the structural reforms set out in the January Memorandum of Economic Policies," according to the memorandum obtained by Kyodo News on Thursday and expected to be released in the next few days.

On Jan. 15, the Indonesian government agreed on an economic reform package sponsored by the IMF, which is a condition of a 43 billion dollar IMF rescue fund.

Relations between both sides plunged to a nadir in February because the country was suspected of reneging on its commitment to the bailout program.

That caused the delay of a second bailout package installment of 3 billion dollars, which was scheduled to be disbursed in mid-March.

"However, implementation has lagged in some areas and difficulties with implementation encountered in others, notably the elimination of certain restrictive marketing arrangements...," the memorandum says.

To rectify the problems, according to the memorandum, the government has set out several steps.

"In particular, the government will by April 22, 1998 eliminate all restrictions on foreign investment in wholesale trade and establish a level playing field in the import and distribution of essential food items between the National Logistics Agency and private-sector participants," it says.

To monitor and guarantee the implementation of the structural reforms, a so-called Executive Committee of the Resilience Council, consisting of government officials, the Asian Development Bank, the World Bank, the IMF and several independent auditors, will be established.

The government is also recommended to draft a law on competition policy "to establish guidelines for fair business practices and to avoid anti-competitive behavior" and the draft law "will be completed by December 1998."

In order to increase budgetary transfer receipts in fiscal 1998 which will end March 31, 1999, sales are planned of shares in three state enterprises, namely the state telecommunication companies, PT Telkom and PT Indosat, and the state cement company PT Semen Gresik.

"This divestment plan will be announced before April 24, 1998," the memorandum says.

In addition to that, it says, seven state enterprises are to be identified for privatization in fiscal 1998 and the list will be announced before April 24.

"This could include enterprises in plantations, infrastructure, mining and manufacturing, including PT Pelindo II (ports infrastructure and management), PT Perkebunan Nusantara IV (palm oil plantation) and PT Jasa Marga (toll roads)," the memorandum says.

"A list of five additional enterprises is to be identified and prepared for listing by June 30, 1998," it adds.

According to the memorandum, transparent procedures will be established by June 30 for divestiture and privatization in collaboration with the World Bank and a blueprint for the privatization over the medium term is to be completed by the end of September this year.

Highlights of Indonesia-IMF Supplementary Memorandum

Macroeconomic outlook:

Expect that the exchange rate will eventually stabilize below 6,000 rupiahs per U.S. dollar.

Expect that inflation will decelerate quickly but will probably still amount to more than 45% during 1998 as a whole.

Predict the real gross domestic product at 4% for fiscal 1998, which started April 1 and will end March 31, 1999.

Intend to limit the deficit to about 3.5% of gross domestic product.

Eliminate subsidies on sugar, wheat flour, corn, soybean meal and fish meal by October 1, 1998.

Ensure that reforestation funds are used exclusively for financing reforestation programs in fiscal 1998.

Provide autonomy to Bank Indonesia, the central bank, in formulation of monetary and interest rate policy.

Publish key monetary data on a weekly basis from April 24, 1998.

Submit to the Parliament a draft law, being prepared with the cooperation of Bundesbank experts, to institutionalize Bank Indonesia's autonomy by December 1998.

Appoint high-level foreign advisers to Bank Indonesia to assist in the conduct of monetary policy by June 30, 1998.

Conduct thorough review of central bank and banking laws in preparation for revising legal framework for banking operations by Sept. 30, 1998.

Submit to the parliament a draft law to eliminate existing restrictions on foreign investments in listed state banks and amend bank secrecy with regard to nonperforming loans by June 30, 1998.

Merge two state-owned banks, Bank Bumi Daya and Bank Pembangunan Indonesia, and conduct portfolio reviews of the two banks by June 30, 1998.

Draft legislation enabling state bank privatization by June 30, 1998.

Privatize state-owned banks by 2001.

Introduce legislation to amend the banking law in order to remove the limit on private ownership of banks by June 30, 1998.

Eliminate all export restrictions.

Establish a clear framework for management and privatization of government assets, including criteria for determining whether enterprises are privatized, restructured or closed and a transparent sales process by September 30, 1998.

Announce seven enterprises, including PT Pelindo II (ports infrastructure and management), PT Perkebunan Nusantara IV (palm oil plantation) and PT Jasa Marge (toll roads), to be privatized in fiscal 1998 by April 24, 1998 and divest them by March 31, 1999.

Identify an additional five enterprises to be listed in fiscal 1998 by June 30, 1998.

Prepare action plans for all 164 state enterprises by Sept. 30, 1998, including the transfer of management responsibilities from various ministries.

Offer for sale additional tranches of government-controlled shares in public enterprises already listed in fiscal 1998.

Audit nonviable public enterprises by December 31, 1998.

Develop a plan for closing nonviable public enterprises by September 30, 1998.

Introduce community-based work programs to sustain the purchasing power of the poor in both rural and urban areas in fiscal 1998.