IMF attempt to Destroy Indonesia Aerospace Industry

[Indos]

Indonesia agrees to put clamps on state hand-outs for IPTN
20 January 1998

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF).

A halt to Government funding for the state-run aerospace company was one of the pre-conditions demanded of Jakarta in return for the IMF's $43 billion bail-out of the stricken Indonesian economy. IPTN has never fully opened its financial books and analysts have long suspected the Bandung company of having racked up considerable losses since its establishment in 1976.

Five years ago, a World Bank visit to Indonesia resulted in swingeing criticism of the country's spending on aerospace, while, in 1994, there was controversy over the diversion of re-forestation funds to help fund the N250 turboprop programme.

Indonesian President Suharto has announced that the cash-strapped company will in future be supported with "private funding". This unlikely to stop indirect state financial assistance reaching the manufacturer, which has been run for the last 21 years by Government research and technology minister, Bacharuddin Habibie.

IPTN has repeatedly claimed that its planned new $2 billion N2130 regional-jet development is a "non-government" programme, support for which comes from the sale of shares by the specially created financing vehicle PT Dua Satu Tiga Puluh (DSTP). The company is chaired by the Indonesian president and directed by the Government's cabinet secretary, while some of the shares have been sold to state investors and pensions schemes.

The establishment of the DSTP was in partial response to mounting criticism of direct Government funding for IPTN. Jakarta had pumped $1.6 billion into IPTN by mid-1996.

Source: Flight International

Indonesia agrees to put clamps on state hand-outs for IPTN

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF). A halt to Government funding for the state-run aerospace company was one of the...

www.flightglobal.com

 

[Indos]

Well the government injection is needed since we have 2 ambitious program running which is N 250 and N 2130 during that time that will try to compete with big boys (Boeing and Airbus). N 250 has just been flying its second prototypes and N 2130 design has been tested in wind tunnel. Stopping the funding means destroying the 2 programs so our investment will be useless.

N2130 program

The IPTN N-2130 was a proposed 80-130 passenger commuter airliner of original design by IPTN (now Indonesian Aerospace). The N-2130 was estimated to cost two billion US dollars. The project was cancelled in 1998 due to the Asian financial crisis.

The aircraft has similarities with the Boeing 737 and Airbus A318.

IPTN N-2130 - Wikipedia

en.wikipedia.org

Here we can see N 2130 is tested in Indonesia wind tunnel

N 250 program

N 250 first prototype has just been flying in 1995

 

[Indos]

This is the reason we paid the IMF debt once we have money


International press

Indonesia IMF payback is end of key chapter for Asia
3 July 2006 by Turkishdailynews


Indonesia’s move to repay its International Monetary Fund (IMF) debt early marks the final chapter of the financial crisis that tortured Asia almost a decade ago, just as investors are again growing wary of emerging markets.

Indonesia is the last of the Asian countries hit by the 1997/98 crisis to pay off its debts, which will free it from the IMF and the policy prescriptions it has grudgingly accepted.

The plan to repay as early as this year $7.8 billion of loans due in 2010 will save $200 million in net interest and give the government greater autonomy.

“Discussions will no longer be needed, so that the government can 100 percent pursue its policies. It can be said that we no longer need a supervisor,” Indonesian Central Bank Deputy Governor Hartadi Sarwono told parliament.

While that would give Indonesia room to go slow on sensitive issues such as privatization of state firms, analysts see it as unlikely to significantly alter the country’ economic outlook due to current account surpluses, a falling debt-to-GDP ratio and a low budget deficit.

Indeed, a sell-off in emerging markets that began last month and the need to build investor confidence means Jakarta will likely pursue economic policies broadly similar to those prescribed by the IMF, at least for a while.

Indonesia depends less on global trade than neighbors Malaysia and Singapore, making domestic factors critical in assessing its outlook.

“I always look at Indonesia not so much from the world but where they are slipping on liquidity management, where are they slipping on fiscal,” said Greg Fager, director for Asia at the Washington-based Institute of International Finance, an umbrella group for 340 of the world’s private sector banks.

“For example, a year ago we were concerned there was too much liquidity in the market and we were watching the oil price escalating. I don’t see those kinds of policy imbalances right now,” he said.

Last week, central bank governor Burhanuddin Abdullah said half the loans would be repaid within weeks and the remainder could be settled later this year due to growing foreign exchange reserves.

Indonesia’s foreign exchange reserves rose to a record $44.17 billion at the end of May, up almost 30 percent this year.

Still, some economists believe that the current market turbulence may see Indonesia hold off on paying back the IMF.

The end of the IMF loans comes as Asia seeks a greater say in the affairs of the Washington-based lender, to reflect its increasing global weight.

Increased Asian representation could give the IMF more credibility in a region with reserves so vast it does not necessarily need the IMF’s help if there were another crisis.

After the Asian crisis, a regional network of bilateral swap arrangements was established for countries to borrow funds from each other to defend currencies at times of crisis.

“It reflects a new era, with growing confidence on a stronger regional cooperation to help countries if there were a crisis again,” the central bank’s Sarwono told Reuters.

He also said there was a possibility of the IMF raising its charges on the countries still under its loan program — Turkey and Indonesia — as early paybacks by Brazil and Argentina had weakened its finances and prompted it to take austerity measures.

Stephen Schwartz, the IMF’s senior representative in Indonesia, has told Reuters the fund welcomed the early repayment plan as it reflected an improved balance of payments and strengthened economic fundamentals.

But privatization, which had been a key plank of the IMF program, has largely stalled under the current administration. The vice president has even called for shares in key firms to be bought back.

“(The IMF) in the past asked for privatization for transparency. But the proceeds had been used to cover budget deficit. That’s wrong because budget deficit is a political choice, whether it zero or whatever number,” Said Didu, secretary to the minister of state enterprises, said.

Still, analysts felt that Indonesia, while better able to pay attention to domestic political sensitivities once the loans are paid off, would not risk antagonizing investors.

Last year, fears that costly oil subsidies would cause a budget crunch sparked a plunge in the rupiah currency and worries of a broader economic crisis. The government responded by slashing fuel subsidies and the central bank hiked rates sharply, stemming the capital outflow and calming markets.

“Indonesia and many regional neighbors have made progress in recent years including a swing to current account surplus, leaving them less vulnerable than during the mid-1990s,” said Singapore-based director of Asian Economic Forecasting David Cohen of Action Economics.

“However, that is not to say that a renewed panic by investors would be painless.”

Indonesia IMF payback is end of key chapter for Asia – CADTM

Indonesia's move to repay its International Monetary Fund (IMF) debt early marks the final chapter of the financial crisis that tortured Asia almost a decade ago, just as investors are again…

www.cadtm.org

 

[antonius123]

Regardless IMF's real intention to destroy Indonesian aerospace industry, this N2130 project would be a very expensive investment and only able to generate revenue in the quite distant future, and quite risky because there is no guarantee the minimum qty order could be reached; hence it was indeed not suitable for a country experiencing economic crisis like Indonesia during 1998.

 

[GumNaam]

Indonesia agrees to put clamps on state hand-outs for IPTN
20 January 1998

View attachment 776285

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF).

A halt to Government funding for the state-run aerospace company was one of the pre-conditions demanded of Jakarta in return for the IMF's $43 billion bail-out of the stricken Indonesian economy. IPTN has never fully opened its financial books and analysts have long suspected the Bandung company of having racked up considerable losses since its establishment in 1976.

Five years ago, a World Bank visit to Indonesia resulted in swingeing criticism of the country's spending on aerospace, while, in 1994, there was controversy over the diversion of re-forestation funds to help fund the N250 turboprop programme.

Indonesian President Suharto has announced that the cash-strapped company will in future be supported with "private funding". This unlikely to stop indirect state financial assistance reaching the manufacturer, which has been run for the last 21 years by Government research and technology minister, Bacharuddin Habibie.

IPTN has repeatedly claimed that its planned new $2 billion N2130 regional-jet development is a "non-government" programme, support for which comes from the sale of shares by the specially created financing vehicle PT Dua Satu Tiga Puluh (DSTP). The company is chaired by the Indonesian president and directed by the Government's cabinet secretary, while some of the shares have been sold to state investors and pensions schemes.

The establishment of the DSTP was in partial response to mounting criticism of direct Government funding for IPTN. Jakarta had pumped $1.6 billion into IPTN by mid-1996.

Source: Flight International

Indonesia agrees to put clamps on state hand-outs for IPTN

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF). A halt to Government funding for the state-run aerospace company was one of the...

www.flightglobal.com

y' all may wanna start siding with China before its too late...the m in imf stands for manipulate!

 

[Indos]

Regardless IMF's real intention to destroy Indonesian aerospace industry, this N2130 project would be a very expensive investment and only able to generate revenue in the quite distant future, and quite risky because there is no guarantee the minimum qty order could be reached; hence it was indeed not suitable for a country experiencing economic crisis like Indonesia during 1998.

So why not allow our government just invest for N 250 program since 2 prototypes have already flown ? And practically airline industry was booming since 2005

 

[Indos]

ATR 72 has been build around 1000 as Today, basically similar market with N 250 since it will also be developed into 72 seats if the money is availabe

ATR 72 - Wikipedia

en.wikipedia.org

Indonesia Aerospace has even made office in Seatle USA to penetrate US market.

 

[Shabi1]

Indonesia agrees to put clamps on state hand-outs for IPTN
20 January 1998

View attachment 776285

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF).

A halt to Government funding for the state-run aerospace company was one of the pre-conditions demanded of Jakarta in return for the IMF's $43 billion bail-out of the stricken Indonesian economy. IPTN has never fully opened its financial books and analysts have long suspected the Bandung company of having racked up considerable losses since its establishment in 1976.

Five years ago, a World Bank visit to Indonesia resulted in swingeing criticism of the country's spending on aerospace, while, in 1994, there was controversy over the diversion of re-forestation funds to help fund the N250 turboprop programme.

Indonesian President Suharto has announced that the cash-strapped company will in future be supported with "private funding". This unlikely to stop indirect state financial assistance reaching the manufacturer, which has been run for the last 21 years by Government research and technology minister, Bacharuddin Habibie.

IPTN has repeatedly claimed that its planned new $2 billion N2130 regional-jet development is a "non-government" programme, support for which comes from the sale of shares by the specially created financing vehicle PT Dua Satu Tiga Puluh (DSTP). The company is chaired by the Indonesian president and directed by the Government's cabinet secretary, while some of the shares have been sold to state investors and pensions schemes.

The establishment of the DSTP was in partial response to mounting criticism of direct Government funding for IPTN. Jakarta had pumped $1.6 billion into IPTN by mid-1996.

Source: Flight International

Indonesia agrees to put clamps on state hand-outs for IPTN

Indonesian aircraft manufacturer IPTN will no longer receive state hand-outs, under sweeping economic reforms announced by the Jakarta Government under heavy pressure from the International Monetary Fund (IMF). A halt to Government funding for the state-run aerospace company was one of the...

www.flightglobal.com

I don't see foul play here, the gov needs to make cuts and prioritize funding to more pressing matters, this is something they can have the private sector finance, doesn't mean cancelation of projects if they are feasible.

 

[Indos]

I don't see foul play here, the gov needs to make cuts and prioritize funding to more pressing matters, this is something they can have the private sector finance, doesn't mean cancelation of projects if their are feasible.

Talk like that is cheap, many business is feasible but many banks still have their own parameter to disburse their money. It happen in real life, not in theory as you said if it is business feasible so banking system can just finance the program.

Mind you that Indonesia was under IMF supervisory during that time and IMF has already stated the project doesnt have business sound since the start, so how come you think that our state owned banks can finance them, or even our private own banks were still in dire condition during that period that needs fresh money from government to survives

Dont talk about foreign banks, since these 2 projects are our first attempt to make plane without partner from big western aerospace companies, no ones want to finance this projects

 

[Chhatrapati]

You can't fund an aerospace industry when you're in a bailout situation. You're the borrower, you have to agree to the terms and conditions and given the IMF program worked seeing Indonesia now, do take time to think what would've happened without the IMF program.

 

[Indos]

You can't fund an aerospace industry when you're in a bailout situation. You're the borrower, you have to agree to the terms and conditions and given the IMF program worked seeing Indonesia now, do take time to think what would've happened without the IMF program.

Basically IMF money is just put on account, the money cannot be used to go against the speculants if we dont fix our own political crisis. That money is put just to bring confident, while Rupiah is already left to market mechanizm.

The rush on Dollar can only be stop because of Indonesian people themselves (and the help of God) that can peacefully transform their nation system from authoritarian regime into democracy that bring much stability and confident to the market. Practically many of our own people buy USD during that period. Habibie as President also become so good and wise not to hold the power until 5 years, but he rush to make election and prepared many laws that make us really a democratic country our people wants.

I dont see IMF as Indonesian savior during the crisis. The real money used to save our banking system is coming from printing the money from our central bank (BLBI) and as consequence all Indonesian suffers from high inflation. It is small and medium businesses that become the reliance as many big businesses were collapse.

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Here take time to read and think as you even dont understand the real problem


The IMF Arrives and Chaos Continues

The IMF arrived in Indonesia with a bailout package totaling USD $43 billion to restore market confidence in the Indonesian rupiah. In return it demanded some fundamental financial reform measures: the closure of 16 privately-owned banks, the winding down of food and energy subsidies, and it advised the Indonesian Central Bank (Bank Indonesia) to raise interest rates. But this reform package turned out to be a failure. The closure of the 16 banks (some controlled by Suharto's cronies) triggered a run on other banks. Billions of rupiah were withdrawn from saving accounts, restricting the banks' ability to lend and forcing the Central Bank to provide large credits to the remaining banks to avert a complete banking crisis.

Moreover, the IMF did not try to curb Suharto's system of patronage that was damaging the country's economy and undermining the IMF accord. This patronage system was Suharto's tool to maintain power; in exchange for political and financial support, Suharto gave powerful positions to his family, friends and enemies (thus becoming cronies). Other developments that were negatively impacting on Indonesia towards the end of 1997 were a serious El-Nino drought (bringing severe droughts that caused forest fires and poor harvests) and rising speculation about Suharto's deteriorating health (which caused political uncertainties). Gradually, Indonesia was heading towards a political crisis.

A second agreement with the IMF was needed as the economy was continuing its downward spiral. In January 1998 the rupiah lost half of its value within the time-span of five days only, causing Indonesians to hoard food. This second IMF agreement contained a detailed 50-point reform program, including provisions for a social safety net, a gradual phasing out of certain public subsidies and the tackling of Suharto's patronage system by ending monopolies of a number of his cronies.

However, reluctance of Suharto to implement this structural reform program faithfully, meant that the situation did not improve. Critics of the IMF, however, point out that the institution pushed for too much reform within too little time, thereby worsening the Indonesian economy. The IMF indeed made errors in its initial approach to the Indonesian crisis but it did come to realize that the key in overcoming this crisis was to restart private capital flows to Indonesia. In order for this to happen the patronage system had to be broken down.


A New Political System and the Start of Recovery

Bacharuddin Jusuf Habibie, vice-president in Suharto's last cabinet and thus - by law - replacing Suharto as Indonesia's next president, turned to the economic technocrats to deal with the ongoing financial crisis. This resulted in a fourth agreement with the IMF. It was signed in June 1998 and allowed the budget deficit to widen further while new funds were pumped into the economy.

Within the time-span of a couple of months there were some signs of recovery. The rupiah began to strengthen from mid-June 1998 (when it had fallen to 16,000 rupiah per dollar) to 8,000 rupiah per dollar in October 1998, inflation eased drastically, the Jakarta stock exchange started to rise and non-oil exports started to revive towards the end of the year. The banking sector (center of the crisis) remained fragile as the number of non-performing loans were high and banks were very hesitant to loan money. Moreover, the banking sector had caused a sharp increase in government debt as this debt was primarily due to the issuance of bank restructuring bonds. But, albeit fragile, Indonesia's economy improved gradually through 1999, partly due to an improving international environment which caused a rise in export revenues.

Asian Financial Crisis - Cause & Effect | Indonesia Investments

The financial crisis in Asia in the late 1990s had a huge impact on Indonesia, evolving from a financial crisis into a social and political crisis.

www.indonesia-investments.com

 

[Indos]

AlhamduliLLAH Indonesian Aerospace is able to get back again and designing other new plane despite the approach is more pragmatic and less ambitious then N 250 (first FBW plane in its category) and N 2130.

The program is basically intended to transmit the knowledge of older design engineers into younger ones who dont have design experience yet. As stated by one Indonesian Aerospace engineer, at the development process one experienced design engineer will accompany every 4 new and young design engineers with no design experience.

The other objective is to make a simple plane with less expensive development cost that can be sold to the domestic and international market without the need to compete with big players (Boeing and Airbus)

 

[antonius123]

AlhamduliLLAH Indonesian Aerospace is able to get back again and designing other new plane despite the approach is more pragmatic and less ambitious then N 250 (first FBW plane in its category) and N 2130.

The program is basically intended to transmit the knowledge of older design engineers into younger ones who dont have design experience yet. As stated by one Indonesian Aerospace engineer, at the development process one experienced design engineer will accompany every 4 new and young design engineers with no design experience.

The other objective is to make a simple plane with less expensive development cost that can be sold to the domestic and international market without the need to compete with big players (Boeing and Airbus)

Exactly. We wont be able to head to head in term of the cost (which then impact sales pricing) with Boeing 737 or Airbus A320 - unless we can secure order almost the same quantity as Boeing/Airbus can receive, not to mention technology & production maturity that they have already reached. But Indonesia has domestic demand for the smaller civil aircraft due to ample archipelago hence smaller civil aircraft will have sound prospect.

Btw N2130 wouldn't compete with Airbus neither Boeing also, they would compete with Embraer, Bombardier, ARJ21 (Comac), and Sukhoi Super 100?

 

[Indos]

Exactly. We wont be able to head to head in term of the cost (which then impact sales pricing) with Boeing 737 or Airbus A320 - unless we can secure order almost the same quantity as Boeing/Airbus can receive, not to mention technology & production maturity that they have already reached. But Indonesia has domestic demand for the smaller civil aircraft due to ample archipelago hence smaller civil aircraft will have sound prospect.

Yup, we should concentrate on Turboprop passenger airplane like N 219, N 245, and R 80 and leave the bigger jet airplane into others.

N 219 IMO will have big demand from cargo companies and airline which has cargo business. Two biggest Indonesian Airline, Garuda Indonesia and Lion Air have cargo division that they want to develop further due to growing E-commerce.

Lion Air has made LOI for about 100 N 219, this must be not for passenger plane I believe.

USA despite not an islands countries like Indonesia and basically have very efficient road and train service still needs this type of aircraft as well.

Here FED EX USA has ordered 100 Cessna Skycourier which has made its maiden flight in May 2020. The looks like N 219 but they use composite material for the airframe to make it lighter. N 219 at the moment choses to use Aluminium for their airframe to make it cheaper, but N 219 Amphibious will use Composite material to make it lighter and better suit for sea environment.

Cessna Sky Courier first flight, Mei 2020

 

[Kai Liu]

Well the government injection is needed since we have 2 ambitious program running which is N 250 and N 2130 during that time that will try to compete with big boys (Boeing and Airbus). N 250 has just been flying its second prototypes and N 2130 design has been tested in wind tunnel. Stopping the funding means destroying the 2 programs so our investment will be useless.

N2130 program

The IPTN N-2130 was a proposed 80-130 passenger commuter airliner of original design by IPTN (now Indonesian Aerospace). The N-2130 was estimated to cost two billion US dollars. The project was cancelled in 1998 due to the Asian financial crisis.

The aircraft has similarities with the Boeing 737 and Airbus A318.

IPTN N-2130 - Wikipedia

en.wikipedia.org

Here we can see N 2130 is tested in Indonesia wind tunnel

N 250 program

N 250 first prototype has just been flying in 1995

If you can make a good airplane on your own, no one can 'destroy' it. Regarding to competing with Boeing and Airbus, even Bombardier and Embraer pose no threat to this dual monopoly. The only potential future competitor is COMAC/CRAIC with their C919 and CR929. But still, we have to wait until our engines like ACAE CJ-1000A become mature.
Talking about ambitious plans, we have the Y-10 program in the 1970s, and made multiple test-fly through the 80s, but the program failed due to various reasons.

It is not IMF who 'destroyed' your aerospace industry, but your plan is unrealistic from the beginning based on your economic and technological strength (no offense, such industry needs trillions of continuous capital inputs, and technology/expertise accumulated, which can only be sustained by the size of the economy of USA, Europe combined, so far, and China potentially).