World Bank gives Indonesia six month deadline

Protesters outside the meeting demanded the donors forgive Indonesia its growing debt burden

JAKARTA, Indonesia (CNN) -- The World Bank has warned the Indonesian government it has only a "narrow window of opportunity" to revive failing investor confidence in the country's crisis-torn economy.

Speaking at the opening of a two-day meeting of donors in Jakarta, the bank's vice president for East Asia and the Pacific, Jamal-Ud-Din Kassum, said Indonesia had just six months get its house in order.

"This immediate opportunity needs to be seized urgently by Indonesia's political leaders to lock in macro economic stability, restore momentum to the policy reform agenda, and move decisively to reduce poverty and vulnerability," he said.

He warned that the September 11 attacks on the United States had "worsened the external environment and caused a significant erosion in investment confidence."

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"For the first time, since the onset of the crisis, the huge domestic risks that Indonesians face are now covered by a new layer of equally dangerous external risk, with a more prolonged and deeper downturn in the external economy on the cards."

The Indonesian government is seeking $3-4 billion in new loans from the meeting to help shore up its flagging economy.

The meeting of the so-called Consultative Group on Indonesia began with protests outside the meeting's venue, the Bank Indonesia complex in central Jakarta.

The demonstrators were demanding the partial or total forgiveness of Indonesia's crippling debt -- registering at roughly 100 percent of the country's GDP.

Massive debt

Over the past three years Indonesia has borrowed some $14 billion, but to little effect.

Government officials blame external factors such as the global economic downturn and a souring investor climate after radical Islamic groups in Indonesia staged anti-American protests following the U.S. strikes in Afghanistan.

Domestic political turbulence has also been an important factor.

The current government of President Megawati Sukarnoputri has been in power for about three months.

It has inherited an economic crisis that has already seen off three administrations.

Nonetheless World Bank officials say that is no excuse for failing to implement economic reforms, such as speeding the privatization of state assets.

Analysts say the international donors are likely to pledge more money to Indonesia pointing out that Megawati has at least brought political -- if not economic -- stability to Indonesia.

That stability, the donors hope, will be the foundation for an economic recovery.

-- CNN's Atika Shubert in Jakarta contributed to this report