Our aid diplomacy<\/p>\n
Indonesia's aid diplomacy excelled once again when it secured
\n$5.3 billion in fresh commitments from major donor countries and
\ninternational lending agencies yesterday. The pledges were made
\nby representatives of 28 donors at a meeting of the Consultative
\nGroup on Indonesia (CGI) in Tokyo. It represents a slight
\nincrease from the $5.26 billion pledged at the CGI meeting in
\nParis last year.<\/p>\n
It may be small, but it is an increase nevertheless and its
\nsignificance goes beyond the amount itself. To some, the increase
\nalmost defies logic. Indonesia went to Tokyo embroiled in rows in
\nGeneva at the World Trade Organization with Japan, the United
\nStates and the European Union -- three economic powers who are
\nalso major donors in the CGI -- over its national car policy.
\nIndonesia went to Japan in the knowledge that Tokyo, facing
\nstrong budgetary pressures at home, plans to slash the overall
\namount of its overseas aid by as much as 10 percent.<\/p>\n
Given all these factors, it is surprising to see that
\nIndonesia managed to convince CGI members to keep the aid
\nflowing. One can attribute this largely to Indonesia's persistent
\naid diplomacy.<\/p>\n
Virtually all the country's top economic ministers were
\ndispatched to Tokyo to explain Indonesia's case for more foreign
\naid. State Minister of National Development Planning\/
\nChairman of the National Development Planning Board Ginandjar
\nKartasasmita was sent there last month to urge Japan to spare
\nIndonesia from its plan to slash its Official Development
\nAssistance. It would be interesting to find out what concessions,
\nif any, were made, to defuse the national car row. Whatever they
\npromised at the CGI talks, which were held behind closed doors,
\nIndonesia's aid diplomacy triumphed this year.<\/p>\n
Diplomacy alone was not enough though. Indonesia's strong
\neconomic fundamentals contributed in no small measure to
\nconvincing donors to sustain aid levels. The currency debacles in
\nThailand and the Philippines, and similar pressures faced by
\nMalaysian and Singapore -- while unfortunate -- helped to
\nhighlight the solidity of the rupiah, resulting from Indonesia's
\nprudent macroeconomic policies. Indonesia may not have
\nexperienced as rapid economic growth rates as its neighbors did
\nin recent years, but it has seen greater stability and put up
\nstronger resistance to external pressures.<\/p>\n
Indonesia, however, is not totally out of the woods. Its
\nbalance of payments remains vulnerable with a current account
\ndeficit estimated to be running at $8 billion. But that is all
\nthe more reason why Indonesia needed the CGI's helping hand.<\/p>\n
Then there is the role played by the World Bank, which
\norganized the Tokyo meeting. The bank not only used its influence
\nto prod other CGI members to maintain aid to Indonesia, it also
\npropped the total aid pledges. The bank raised its commitment
\nfrom $1.2 billion to $1.5 billion, which more than made up for
\nthe shortfall resulting from the lower Japanese commitment. It
\nwas also the World Bank's annual report on Indonesia, published
\nlast month, that gave a strong endorsement of Indonesia's
\nmacroeconomic policies. As in previous CGI meetings, the decision
\nto give another $5.3 billion to Indonesia this year is another
\nvote of confidence on the Indonesian economy and the government's
\nmacroeconomic policies.<\/p>\n
Alas, considering that all good things must come to an end,
\nevery year, at the conclusion of the CGI meeting, one always
\nwonders when the lending will start to fall, or even end
\ncompletely. As Indonesia reaches the category of a middle-income
\ncountry, it cannot expect donors to continue to be as generous as
\nthey have been.<\/p>\n
Besides, all loans will have to be repaid some day. In recent
\nyears, Indonesia has been repaying loans more than it is
\nreceiving in new aid because of heavy past borrowings. This is
\nbound to add pressure to its balance of payments which must be
\nredressed not by borrowing more, but by bolstering exports,
\nparticularly in the non-oil sector.<\/p>\n
Rightly however, so long as the going is good, why not borrow
\nmore. They are after all, loans at very concessionary terms that
\nare too good to pass up. Next year is another case to work on,
\nfor the economy, and for our economic ministers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/our-aid-diplomacy-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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