APRIL 7, 1998
BusinessWeek Online


President Fidel Ramos of the Philippines welcomes the latest International Monetary Fund agreement with Indonesia due to be announced on Wednesday, Apr. 7, calling it "good news" for a region hard hit by the Asian financial crisis.

But in an interview with Business Week editors in New York on Apr. 6, Ramos cautioned that the agreement is only a first step. Southeast Asia -- and especially Indonesia -- will need real reform to recover. "The first order of the day is reform, especially of the banking system, financial institutions, and the entire cluster of programs and actions that would truly ensure the free play of banking forces," said Ramos, adding that reform " must be sustained."

Indonesia is about to sign its third agreement for a $43 billion bailout from the IMF. The first two fell apart after the country was unable to maintain its commitments to austerity measures demanded by the IMF, such as ending state subsidies and dismantling cartels controlled by family members and close friends of President Suharto. Indonesia's neighbors have been particularly concerned: As the crisis worsens in Jakarta, it threatens the ability of other Southeast Asian countries to recover.

The Philippines spent three decades under IMF supervision and was released from the program only last week. "These lessons we have learned the hard way. But by taking the bitter medicine that was prescribed, we are probably one or two steps ahead, because we have put in our reform programs," Ramos said. "We have put our house in order."

The Philippines expects GDP growth of about 2.5% this year, down from 5% last year but far ahead of the recessions predicted in Indonesia and Thailand, which have been much harder hit by the Asian crisis.

By Sheri Prasso in New York