Our debt burden<\/p>\n
It is a relief to hear that the Consultative Group on
\nIndonesia (CGI) last week committed US$ 5.2 billion in new loans
\nand grants to Indonesia for the current fiscal year. With this
\ncommitment, Indonesia is more assured of financing its
\ndevelopment plan for the current fiscal year.<\/p>\n
The total amount needed for the development budget is around
\nRp 27,4 trillion (about US$ 12.8 billion). More than one third of
\nthat amount is expected to be financed by foreign loans arranged
\nthrough the World Bank-chaired CGI. Now that Indonesia has the
\nCGI pledge, a substantial part of the financial hurdle has been
\novercome.<\/p>\n
It could be said that this pledge once again shows confidence
\non the part of the international community as represented by CGI
\ntowards Indonesia's management of its foreign loans and economic
\ndevelopment. The World Bank indeed has repeatedly pointed out in
\nits yearly country report on Indonesia that the Indonesian
\ngovernment has been prudently managing its external debts.<\/p>\n
In short, Indonesia has proven over the years that its
\ncreditworthiness is high. Indonesia has never reneged on the
\nservicing of its external debts, even at times of financial
\ncrisis. In other words, Indonesia is a good place to extend a
\nloan to.<\/p>\n
On the other hand, a loan is a loan, which has to be repaid,
\nprincipal plus interest. And for Indonesia, like for many other
\ndeveloping countries, the duty of servicing its external debts
\nhas been becoming increasingly burdensome. And it has become
\nharder and harder to figure out when that burden will be lifted.
\n Ever since 1987, the amount of money flowing out of this
\ncountry to service its external public debts has been
\nincreasingly higher than the amount of new loans and grants
\nflowing in. Since fiscal year 1987 through 1993, Indonesia has
\npaid out not less than Rp 89.8 trillion to service its external
\npublic debts. Within the same span of time, external loans and
\ngrants to finance public projects amounted to only Rp 66.1
\ntrillion.<\/p>\n
In the 1987 fiscal year, the balance was around Rp 2 trillion,
\nor 33.23 percent in favor of the creditors. Last year, the CGI
\ncreditors received around Rp 7.1 trillion net, or 74.9 percent
\nmore than they provided in new loans and grants. This year, the
\nnew commitments do not lessen the negative flow. No wonder the
\nCGI creditors unhesitatingly support the World Bank's
\nrecommendation to continue providing Indonesia with new loans and
\ngrants. Because instead of outflow, what they will receive is a
\nnet inflow of around US$ 4 billion.
\n Considering that, it is all the more important for us to use
\nthe foreign loans more efficiently. President Soeharto pointed
\nout that during the past weekend when Minister Mari'e Muhammad
\nreported the results of the two-day CGI meeting in Paris. He
\nemphasized that the loans and grants will be used prudently for
\nproductive projects only.<\/p>\n
Efficiency, however, is not our strong point whenever a public
\nproject is the subject of discussion. Whenever the World Bank
\ncomplements the prudence of Indonesia's bureaucracy in managing
\nits foreign debts, that praise does not cover efficiency.
\nInstead, one of the challenges of Indonesian economic
\ndevelopment, as pointed out in the World Bank's report, is the
\ninefficiency of its execution. This inefficiency is indicated by
\nthe still high ICOR (incremental capital output ratio) of
\nIndonesia's public projects. This ratio indicates the number of
\nunits of input required to increase output by one unit.<\/p>\n
According to the World Bank's estimates, Indonesia's ICOR is
\nrelatively high at 4 - 5. In other words, to get an increase of
\none unit in production, Indonesia needs 4 to 5 units of input,
\nwhich is higher than normal standard. From a management point of
\nview, such a high ICOR is seen as inefficiency. In layman's
\nwords, there are too many leaks along the process of the
\nexecution of a public project. In political terms, that is often
\ncalled corruption.<\/p>\n
The burden of servicing foreign debts is already very heavy
\nfor us to bear and is becoming increasingly so. It is hard to
\nimagine what the public reaction would be if people were to
\nrealize that a substantial part of that burden is brought about
\nby corruption.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/our-debt-burden-1447899208",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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