Transcript: Treasury Sec. Summers Jan. 20 Jakarta Press Conference
(U.S. supports democracy, law-based economy for Indonesia)The United States is prepared bilaterally, through multilateral institutions, and through its participation, to provide strong support to Indonesia democracy and the creation of a new law-based Indonesian economy, according to Treasury Secretary Lawrence Summers.
During a press conference in Jakarta January 20, Summers said the United States and the international financial institutions providing assistance to Indonesia will be watching developments there very carefully. "It will be the success, basically, in establishing the rule of law that will have a great deal to do with the efficacy with which assistance can be used to put the Indonesian economy back on the track that it should be on in providing rapid growth and living standards for the Indonesian people," he said.
"The United States has a deep and profound commitment to Indonesian democracy," Summers said. "Democracy is the right way forward for Indonesia, the Indonesian people, and it is the right way forward ... for the Indonesian economy. Because only democracy and an independent judiciary can provide a basis for the reliance on the rule of law that is essential for attracting capital and maintaining economic stability. Secretary (of Defense William) Cohen has said on many occasions civilian control of the military is one crucial aspect of what it means to be a democracy."
Summers cautioned that establishing the rule of law is not something that happens overnight. "It is something that will take time, but it is something that is overwhelmingly important in our judgment to economic success," he said.
Summers also underscored the U.S. commitment to social safety net mechanisms as a crucial part of its support for economic reform in Indonesia.
Following is a transcript of the press conference:
(begin transcript)
U.S. Treasury Secretary Lawrence H. Summers
Press Conference
Regent Hotel, Jakarta, Indonesia
January 20, 2000I'm glad to be here in Jakarta. We have had a productive day of discussions. President Wahid and I had a very good conversation in which I congratulated the President on the budget that was being announced today, congratulated him on the Letter of Intent that they have signed with the IMF, and discussed the importance of moving rapidly to establish the rule of law very strongly in the economic area. We also talked about the importance of the investments in Indonesia's people.
I was struck on the visit we paid to the fishing village by the obvious success and efficiency that, in the right circumstances and with the right financial support, non-governmental organizations can have in providing food. And in my conversations with Indonesian government authorities, I emphasized the important role of NGOs, both economically and politically, in the new Indonesia.
This afternoon we met with the members of the economic team, including Coordinating Minister Kwik and his colleagues, and had what I thought were very useful discussions on a range of issues including bank and corporate debt restructuring, including fiscal policy and including the issue of IPPs, where, I believe there is some progress being made in resolving some long-standing differences and agreeing to the principle of commercial negotiation.
I look forward in a little while to meeting with the Attorney General, Marzuki Darusman. On most of my trips I don't have the opportunity to meet with attorney generals, but in light of the tremendous salience of the rule of law as an economic issue here in Indonesia it would seem to us to be appropriate to have that meeting.
All in all, I just want to conclude by saying that the United States has a great interest what happens here in Indonesia and that the government of the United States is prepared bilaterally, through multilateral institutions, and through its participation, to provide strong support to Indonesia democracy and the creation of a new law-based Indonesian economy. I would be happy to respond to your questions.
Q: How would you rate the ability of President Wahid and his team to pull through the reform issues that you have laid out? A lot of the problems here seem not to stem so much from the lack of will on the part of the government but the lack of support in other circles here. And how much your message, in light of that, was directed not so much at the government as much as at other circles that might be having an interest in this?
SUMMERS: We will have to see what happens. A great deal has been accomplished in the macro-economic arena with the inflation rate brought down to very low levels, with interest rates having come down, with the government discussing the size of its IMF program in the context of its own concern about how much debt it wants to take on. There clearly have been significant steps toward far greater involvement of NGOs and significant steps toward acceptance of the principle of the rule of law. There are, to be sure, great difficulties in implementation, both in terms of large government organizations that have to carry out complex missions and in terms of entrenched interests that have to be confronted. But one of the points that I stressed in my conversation with President Wahid, and it was something that he said very emphatically: a period after an election mandate is a period when the opportunity to do necessary things is greatest. I sense real determination on the part of the counterparts with whom I spoke and I think the international community has a great stake in providing support.
We will be watching very carefully, both in terms of U.S. bilateral assistance, and I know the international financial institutions will be watching developments very carefully. It will be the success, basically, in establishing the rule of law that will have a great deal to do with the efficacy with which assistance can be used to put the Indonesian economy back on the track that it should be on in providing rapid growth and living standards for the Indonesian people.
Q: Can you collaborate the (inaudible) community as you mentioned in your earlier speech?
SUMMERS: I'll leave it to the international financial institutions to speak to the precise parameters of their programs, but my remarks gave a sense of what I understand to be the general magnitudes.
Q: I was actually going to ask whether you actually had pledged fresh funding?
SUMMERS: There is a commitment that is implicit in the IMF Letter of Intent. The World Bank and Asian Development Bank have ongoing loan programs and we are supporting an expansion in those loan programs to reflect the social concern and the need for institutional development here. With respect to bilateral U.S. assistance, which goes to finance institution building, and finance technical assistance, I think I indicated in my prepared remarks this morning that the figure had been approximately $90 million last year, and I expect that it would be significantly increased over the next several years.
Q: The Letter of Intent that the government signed this morning is a 43-page document that goes into excruciating detail about what the government should be doing in the next few years. You said that you would like to see an IMF that is more focused and more slimmed down, more focused as I understand it on macro-economic issues. I wonder whether this type of detailed document is the sort of thing that you would like the IMF to stop producing.
SUMMERS: What I've said in the past is that I believe it will be appropriate for the IMF to focus on providing assistance temporarily to countries, and that it will be appropriate for the IMF to concern itself with the nexus of issues that are important for macro-economic stability. But at the same time, I think we have been careful to recognize that the nexus of issues that we understand to be related to macro-economic stability is perhaps broader than was understood some time ago. One of the other things that I stressed in the speech that you are referring to was the importance of banking systems and the functioning of financial systems as a central area of responsibility.
While I have not counted paragraphs in that 43-page document Letter of Intent, my impression is that a very large fraction of it goes to issues relating in one way or another to the use of fiscal resources, and particularly to the approach that is to be taken with respect to financial restructuring. Insofar as that's the case it probably is in line with what we would prefer. There may be elements that go beyond that. This is a Letter of Intent that's been in train and discussions for some time. The international community is going to need to find its way on these issues with respect to the role of the IMF.
Q: Mr. Secretary, your thoughts on two issues perhaps, the government's new state budget and maybe the non-existent military coup, an issue the U.S. Government is obviously concerned with.
SUMMERS: Well, with respect to the government budget, the government budget embodies the commitments made in the Letter of Intent, which as we have said I think represent a sound set of macro-economic commitments and the priority really attaches is to the institutional development questions relating to the establishment of the rule of law.
With respect to your second question, I hope it's clear from what I have said, and certainly it is clear from what other senior officials in our government have said that, the United States has a deep and profound commitment to Indonesian democracy. Democracy is the right way forward for Indonesia, the Indonesian people, and it is the right way forward, as I explained in my speech this afternoon, for the Indonesian economy. Because only democracy and an independent judiciary can provide a basis for the reliance on the rule of law that is essential for attracting capital and maintaining economic stability. Secretary Cohen has said on many occasions civilian control of the military is one crucial aspect of what it means to be a democracy.
Q: Mr. Secretary, in terms of the rule of law which seems to be the centerpiece of the assessment of Indonesia's prospects going forward, another country that has been struggling with that particular issue is Russia and it would seem that it's success could be described as mixed at best. What sort of confidence do you have that the administration here is determined to tackle the judges that you have mentioned, is prepared to ensure that this sort of Bank Bali scandal isn't going to happen again? And, as a second question, in terms of the poverty that we have seen on the tour of Asia, how do you assess what you've seen going from place to place and put that in your own personal perspective of how you view the economic scene?
SUMMERS: With respect to your first question, establishing the rule of law is not something that happens overnight, and it is something that will take time, but it is something that is overwhelmingly important in our judgment to economic success. I think there are many, many differences between the Russian and the Indonesian situations and that they are not really parallel situations.
I would agree with what I think is the premise of your question, which is that the establishment of the rule of law as a basis for contractual, commercial relations is, I think, very important to success in Russia as it is here in Indonesia.
With respect to your second question, let me just say that here in Indonesia I thought it was important to visit a portion of the social safety net mechanism that has been put in place in wake of the crisis. I thought it was important to visit because I thought it was a very important aspect of the performance of the economy and of public policy in the wake of the crisis.
I thought it was important to visit to underscore our own commitment to the social safety net as a crucial part of our support for economic reform, and I thought it was important to visit because one of the things that I hope to do when I visit a country is to understand better the economic issues and challenges that its people and its government face. And I think one is better able to do that in the context of having some opportunity to see the situations that are more typical of the majority of the way the majority of the citizens in the country live than one has an opportunity to having meetings within this hotel.
Q: Days ago some delegations from Singapore come here and there was a riot in Bintan and when the delegation from U.S. come here there was a riot in Mataram. Maybe you have a comment on this. And the second question, did your coming here have any relation with U.S. trade delegation? I hear that U.S. trade delegation wants to buy some assets in IBRA, and is your coming here to open the way to make it easy for U.S. interests to buy some asset in BBPN?
SUMMERS: One of the things that President Wahid stressed in his discussions with President Clinton in November was that he thought it was very important that Indonesia create an economic environment where it can attract foreign capital. President Wahid and his colleagues are very interested in what kinds of things would be important in creating an environment that would attract foreign capital and that was certainly one of the things that we discussed in the context of our meetings. That was certainly one of the issues that I addressed in the context of my speech. Beyond that, we didn't get into discussion of specific commercial transactions or opportunities for foreign firms.
With respect to the disturbances that you referred to, it's my impression that their roots lie in domestic strains of a number of different kinds. As I suggested in my prepared remarks this morning, my sense that the prospect for managing them as effectively as possible is very much intertwined with the issues of economic development. With success in managing the political issues there will be more confidence, which will help with the economic issues.
On the other hand, with success in managing the economic issues, there is likely to be more stability, which in turn would contribute to some of the political issues. So, it seems to me that they are very much intertwined.
Q: Two semi-unrelated questions because I want to follow up on an earlier question. One of the NGO officials that was at the site this morning said that it's useful to have people like you come to visit because particularly when someone like yourself has an impact on the U.S. budget comes and sees the need that it makes it you more of an advocate for funding for these kinds of projects. I wanted to ask you if that is indeed the case, and if so, do you think that others would be well served by coming to see the sorts of things that you have seen? The second question--and I apologize for being on a different track--but we have very few opportunities here, and that is about another country's troubles. Finance Minister Miyazawa said at this weekend's meeting of the G-7 that it's important for the G-7 nations to put in their statement or to make it public that they understand, and he said the word understand is important, that Japan's economy has not entered a sustained recovery and that a strengthening yen is not good for them. From the U.S. point of view, do you understand that and are you willing to commit to such language?
SUMMERS: One of the things that I am looking forward to doing in Japan is having discussions with Finance Minister Miyazawa. The G-7 will consider the situation of all the G-7 economies, including Japan, in the context of its surveillance discussion as we usually do.
I think that, as I suggested in the speech I gave last Friday, you may have seen my feeling is that priority in addressing issues of growth needs to go to the tools of domestic demand management, to the tools of structural policy. My feeling is that to the extent that there are concerns about solidly establishing expansion in Japan, the best response is a focus on the tools relating to domestic demand management both in the macro-economic and structural area in Japan.
With respect to your first question, I certainly feel that from visits like the one I made this morning and several others I have made on this trip, I have come to a greater understanding of some of the social issues that are involved the economic reform process. I think that that is helpful in formulating economic policy and thinking through assistance strategies. Just what the implications are will vary from case to case, but in my judgment my colleagues and I who have made a practice for some years of visiting various kinds of social investment projects in countries that we visit have found it to be very worthwhile.
Q: How concerned are you about the recent violence that has swept the country over the past few weeks and what impact do you think that will have on economic recovery and do you believe that this government can actually stabilize the situation?
SUMMERS: I was very impressed with President Wahid's description of his determination to achieve stability. I think basic stability and order is the beginning of the rule of law, and so I think it is very important that those concerns be addressed. And, as I said, I was impressed by President Wahid's determination.
Q: Did he spell out how? Did he give you a fair idea of (inaudible)?
SUMMERS: He spoke about those issues a little bit. Frankly, the focus of our discussion in line with my responsibilities was much more on the economic policy side.
Q: You were talking about establishing the rule of law, and I just want to ask you were there any talks with President Wahid on allocation or non-allocation of the aid, the financial aid, to the military, who historically has been a problem on the establishment of the rule of law here?
SUMMERS: I think that President Wahid made clear in the context of our conversations the importance he attached to developing the institutions of civil society, including non-governmental organizations as crucial components of the economic development strategy. I, in the course of discussions I had with the economic team, emphasized the importance of the requirements in U.S. law with respect to our support for international financial institution programs, the countries developed transparent approaches to accounting for their military expenditures, and I stressed the importance of those issues in an Indonesian context.
Q: You mentioned about some social issues that you have come to understand in your visit to Indonesia these days, so what did you learn from today's visit in Muara Angke? You visited Muara Angke for about an hour in the morning, so what did you learn, because I know you had some dialogue with the local people. What did you learn about the social issues and that particular village that comes in economical terms of Indonesians?
SUMMERS: I wouldn't begin to presume to claim that one can get a rich understanding of the economic life of a village from a short visit. I think seeing the NGO and seeing what it can do, and seeing the government support that NGO, and hearing about its expansion plans did give me a greater appreciation of the role that NGOs can play in providing assistance. I think understanding the way in which the program of distributing rice was structured and some of the changes that had been made in response to concerns that had been expressed, gave me a greater understanding of some of the problems associated with designing social safety nets. And I think visiting the school and seeing how alert and knowledgeable those children were gave me a greater sense of the potential of Indonesia's economy in society.
Q: You're about to meet the Attorney General, does this mean that the United States is in support of efforts to prosecute former President Soeharto for corruption and any of his allies?
SUMMERS: I don't expect that particular issue to be a focus of my discussion with respect to the Attorney General. U.S. policy is always to support the legitimate enforcement of countries' laws. That is our policy around the world. Thank you.
(end transcript)
(Distributed by the Office of International Information Programs, U.S. Department of State)
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