1. The 14th meeting of the Consultative Group on Indonesia (CGI) was held by the Government of Indonesia on January 19 and 20 in Jakarta.

2. At this CGI meeting, the Japanese Delegation headed by Ambassador Yutaka Iimura, stated its views and announced assistance as follows;

3. The main points of the Japan’s statement at the CGI meeting.

1. At first, the Government of Japan would like to express its deepest condolences to the victims of the earthquake and tsunami in Aceh and their bereaved families. Japan will assist in reconstruction and rehabilitation works in every possible way. Japan will provide assistance to the maximum extent possible in three ways: financial resources, knowledge and expertise, and human resources as was clearly announced by Prime Minister Junichiro Koizumi of Japan at the Special ASEAN Leaders’ Meeting on Aftermath of Earthquake and Tsunami on January 6.

2. It is encouraging to see that the Government of Indonesia maintains its strenuous reform efforts and proper macroeconomic management even after the graduation of IMF program at the end of 2003. Japan welcomes Indonesia’s achievement of the macroeconomic stability. And the new government inaugurated last October has strongly committed to promote structural reform the Japanese Government will support the realization of reforms as much as possible.

3. The Government of Japan welcomes the declining trend of domestic interest rate, the current level of inflation rate, and the stabilized exchange rate of the Rupiah thanks to the appropriate monetary policy by Bank Indonesia. However, resurgence of high inflation rate and significant depreciation of the Rupiah would inevitably have substantial negative impacts not only on fiscal sustainability but also on private sector activities. Therefore, the Bank should remain vigilant and prudent with due attention to external environments such as trend of foreign interest rate and oil price. To enhance its effectiveness of its monetary policy, the Bank is expected to proceed to the full-fledged “inflation targeting mechanism”.

4. Improvement of investment climate is one of the most important policies for Indonesia as well as for the business people here, in order to reduce unemployment and to alleviate poverty. We highly appreciate the new government for its understanding the importance of investment and showing its willingness to tackle improving the investment climate seriously. The Japanese government, through the activities of Investment Climate WG, a High Level Government/Private Sector Joint Forum on Investment, and other bilateral frameworks, will continue to work for better investment climate in Indonesia. The Japanese government will promote policy discussion between business sectors and the government and will support capacity building of the government officials by technical assistance.

4. Japan’s pledge of assistance

1. Japan will continue to support the new government’s efforts of Indonesia toward its reform as much as possible. As for Japan’s contribution to filling the CGI financing requirement of around US$ 2.8 billion in the fiscal year of 2005, Japan is ready to provide approximately US$ 715 million of assistance through the disbursement of already-committed yen loans and grant aid assistance which is expected to cover more than one fourth of the total CGI financing requirement in the fiscal year of 2005. In addition to that, financial flow of the export credit about US$ 400 million is expected. Combining the disbursement and financial flow, Japan will extend the amount of approximately US$ 1,115 million.

2. Japan recognized the importance of the improvement of economic infrastructure which is conducive to the improvement of investment climate. In this regard, Japan has made its pledge of ten (10) new Yen loan projects for this fiscal year. The total amount of the projects is 114.8 billion Japanese Yen, equivalent to some US$ 1,073 million (9.7% increase compared with last year). In the selection of these ten (10) projects, the Japanese government gave a high priority to projects, focusing on improving the investment climate in Indonesia such as improving power supply and road. (Please see attachment for projects’ name.) Among the projects is Development Policy Loan of US$ 100 million in the form of co-finance with World Bank which is based upon the expectation that the Government of Indonesia further pursues economic reform.

3. For the emergency assistance to the damages caused by the earthquake off the coast of Sumatra, and by the Indian Ocean Tsunami Disaster, in addition to the emergency assistance in kind and in grant of US$ 1.89 million in the aftermath of the earthquake, Japan provides a grant aid assistance of US$ 146 million. Japan encourages the Government of Indonesia to utilize the unused funds of past grant assistance equivalent to US$ 29 million. Furthermore, for disaster affected countries, Japan will provide US$ 250 million through relevant UN agencies and US$ 40 million through the Japanese Trust Funds at ADB and the World Bank. Substantial portion of the grant is anticipated to be spent for their activities in Indonesia.

5. Japan hopes that, with an effective use of these assistance, the government of Indonesia will appropriately address the country’s development needs, and achieve further economic stability and also sustainable economic growth driven by private investment.

Statement by Japanese Delegation (pdf file)

TOP page