By Abid Aslam
Inter Press ServiceMay 21, 1999 Washington - The World Bank has approved 1.1 billion dollars in new loans to Indonesia on condition that Jakarta does not use the money until after parliamentary elections on June 7. Indonesian authorities have agreed to deposit the funds in a blocked account which cannot be used until June 30.
The funds cleared by the Bank Thursday included a 500-million- dollar 'Second Policy Reform Support Loan' and a 600- million- dollar 'Social Safety Net Adjustment Loan'. The former will provide general budgetary support tied to bank and corporate restructuring and the latter will aid food, health, and scholarship programmes, according to a Bank statement. ''We don't need the money immediately but we do need the commitment now, so we can plan budget spending over the remainder of the fiscal year,'' said Jannes Hutagalung, the Indonesian executive director at the World Bank.
Loan approval had been scheduled for Tuesday, when two smaller funding packages were passed. These included a 300-million-dollar 'Water Resources Structural Adjustment Loan' and 100 million dollars for the 'Indonesia Urban Poverty Project'. U.S. officials postponed a decision on the larger loans by 48 hours, citing fears that the money would be used by the Jakarta government, dominated by President Suharto until his resignation a year ago, to buy votes in Indonesia's first free election since 1955.
Those concerns were raised by more than 400 Indonesian citizens' groups, who warned that the loans ''will be utilised by the ruling Golkar party to ensure its hold on power.''
''There is no technical reason why these loans cannot be postponed,'' they said in a letter to the Bank's executive directors. The government ''has proven that it has sufficient cash reserves to arm an extraordinarily violent militia movement in East Timor, to send troops to seal off the border of West Papua, and to send troops to fire on unarmed demonstrators in Aceh.'' Each of the three regions has challenged Jakarta's hold over it.
''Instead of increasing Indonesia's staggering debt load, which will have to be repaid by our children and grandchildren, the Bank should pressure the (government) to redirect towards poverty alleviation the tremendous amount of funds it is currently using for the repression of our civilian population,'' the religious, development and environmental groups said. Next month's parliamentary elections will pave the way for the selection of a new president later this year. Polls have shown that President B.J. Habibie - Suharto's hand-picked successor - and Golkar have suffered because of continuing disclosures of corruption during the Suharto regime. In addition, the World Bank itself came under fire for tolerating and covering up misuse of past loans.
Sources at the lending agency and the International Monetary Fund (IMF) said the agreed spending freeze likely would bolster the Bank's and Habibie's credibility without upsetting scheduled implementation of an economic programme adopted under the IMF's tutelage. The Fund so far has disbursed some 9.5 billion dollars of its 11-billion-dollar loan commitment. The IMF's board of directors was scheduled to meet at the end of this month to clear another 460 million dollars and this sum likely would be accompanied by 500 million dollars in loans under Japan's 'Miyazawa Plan'. Disbursement of the safety net loan will be ''contingent on clear evidence'' of strengthened governance and accountability in social programmes, the Bank said.
Earlier this year, Indonesian media reported that the government had ''mistargeted'' or misappropriated nearly half of the country's 'Social Safety Net Fund' and that officials had advertised much of the money meted out as ''Golkar aid.''
The letter from the grassroots organisations in the South East Asian country urged that the programme be taken back to the drawing board and its design opened to broader participation by the intended beneficiaries. They argued that, as currently set up, the scheme was in violation of the Bank's rules on adjustment lending, which call for ''political stability (and) support - or at least the lack of opposition - from the principal constituencies.'' The groups noted that, last month, ''7,000 of the Jakarta urban poor, one of the principal constituencies of the programme, signed a petition rejecting the...programme based on their experience that it is full of corruption, does not benefit the poor and leads to a tremendous debt burden to our country.''
Alleged violations of Bank rules also have been made by Indonesian farmers against the 'Integrated Swamps Development Project', which they said was plagued with corruption and had resulted in increased use of hazardous pesticides despite Bank pest management policies geared to reduce dependence on the harmful chemicals. Environmentalists last month urged the Bank to ''release all financial and technical audits of the swamps development project...(and) establish an independent body to which Indonesian farmers can report complaints, irregularities, extortion, etc. without fear of reprisal.'' Bank officials said they were looking into the farmers' complaints.
The urban poverty project approved Tuesday was the first since 1980 to be fully funded by the International Development Association (IDA), the World Bank's soft loan window. Indonesia's economic and social meltdown, which has pushed around half of the country's 200 million people below the poverty line since 1997, moved the Bank to list the country as temporarily eligible for virtually no-interest IDA loans, normally reserved for the poorest countries.
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
