FINANCIAL ASSISTANCE FOR INDONESIA

Mr Zulkifli Bin Baharudin asked the Minister for Foreign Affairs (a) whether the Singapore Government has received new requests for financial assistance from the Indonesian Government; and (b) whether Singapore will consider providing other financial assistance because of the increasingly difficult political and economic situation in Indonesia.

Prof. S. Jayakumar: On the first part of the question:

The Member will recall that we offered Indonesia a S$1.2 billion economic assistance package during PM's trip to Jakarta in January 2000.

However, given the low take-up rate of the package, the Indonesians have expressed an interest to explore other means of implementing the package, in particular the S$400 million Loan Financing Scheme*.

• The economic package comprised a S$400 million Loan Financing Scheme for Singapore investments in Indonesia; a US$500 million Singapore Co-Investment Fund for Indonesia; a S$2 million Tourism Cooperation Package; and cooperation projects in the Riaus.

On our part, Singapore reiterated that the objective of the Loan Financing Scheme is to encourage Singapore companies to look for commercially viable opportunities in Indonesia. Loans are provided to Singapore companies interested to invest in Indonesia through Singapore-based financial institutions. That said, we are prepared to work with the relevant agencies in Indonesia to "match make" Indonesian and Singapore investors and SMEs. The idea is for the Indonesian Government to inform us of the sectors where there are possible investment opportunities and forward a list of potential Indonesian partners. We can then facilitate matching these Indonesian companies and interested Singapore companies.

On the second part of the question:

The S$1.2 billion economic assistance package will continue to be made available to Indonesia. The package is intrinsically sound, and there have been some cases of success. In March 2000, the Government of Singapore Investment Corporation participated in an international consortium, led by Cycle and Carriage (Singapore), by investing US$76 million in Astra.

All foreign investors, however, make decisions based on commercial considerations. Feedback from Singapore companies and financial institutions indicate that the general take-up rate of the package is unlikely to improve until and unless the domestic political and economic situation in Indonesia stabilises and investor confidence returns. Moreover, with countries in Northeast Asia adopting aggressive policies to attract investments, investors will naturally gravitate to them.

Aside from the economic package, we will continue to build on our economic cooperation with Indonesia for mutual benefit. In January 1999, the West Natuna Gas Agreement was concluded between Singapore's Sembawang Gas Pte Ltd and Indonesia's state-oil company, Pertamina. This deal is expected to generate earnings of US$8 billion over 22 years and create employment for many Indonesians.