WB retains 1% advanced fee on loans despite RI concern<\/p>\n
JAKARTA (JP): The World Bank vice president for East Asia and
\nthe Pacific region, Jean-Michel Severino, said on Friday that the
\nbank retains the one percent advance fee it charges to borrowers
\ndespite concern from Indonesia.<\/p>\n
Severino said the bank had implemented such a fee since two
\nyears ago, when it decided to change the terms of its loans,
\nwhich were applicable to all its borrowers, including Indonesia.<\/p>\n
\"This has been in implementation for two years. So I don't
\nknow why this issue suddenly surfaces as a problem,\" Severino
\ntold journalists at the bank's office here.<\/p>\n
National Development Planning Board (Bappenas) deputy chairman
\nHidayat Syarief said earlier that the government was asking the
\nWorld Bank to drop the one percent advance fee it has to pay once
\nit signs a new \"project loan\" with the bank.<\/p>\n
He contended that the advance fee was burdensome for the
\ngovernment as it was imposed on top of the usual commitment fee,
\nwhich ranges between 0.25 and 0.75 percent, and the interest
\nrate.<\/p>\n
Severino again reiterated that the bank imposed the advance
\nfee to all borrowers, not only Indonesia, and therefore, it had
\nnothing to do with Indonesia's situation or country risk.<\/p>\n
\"It doesn't reflect any assessment of the country risk in
\nIndonesia nor entail any particular relationship with Indonesia,\"
\nhe said.<\/p>\n
He noted that the World Bank decided two years ago to change
\nthe terms of its loans and create a structure in which borrowers
\nwould pay a flat fee of 1 percent when they got the money and
\nthen pay 0.7 percent above the bank's borrowing cost, which is
\nnormally close to the London Inter-Bank Rates (LIBOR).<\/p>\n
The charges the borrowers have to pay to the bank are still
\nmuch lower than if they raised the money from the market by
\nthemselves, Severino said.<\/p>\n
\"Indonesia could not get this term if it were to borrow
\ndirectly from the market. It would get LIBOR plus five, six or
\nseven percent ... as most developing countries in the world
\nnormally get,\" he said.<\/p>\n
For the bank, he said, the one percent flat fee and the 0.7
\npercent spread were not enough even to cover its operation. Most
\nof the revenue the bank got, he said, was from the placement of
\nits capital in the financial market.<\/p>\n
\"If we were to live with this 0.7 percent, we would lose our
\nshorts and become a bankrupt institution,\" he said.<\/p>\n
\"So we are a very cheap institution. We don't even charge our
\nborrowers the full cost of our administrative expenditures and
\nthe cost of provisioning, etc.,\" he said.<\/p>\n
Nevertheless, the bank does not impose an advance fee for
\nprogram loans which are used to finance government programs,
\nincluding the social safety net.<\/p>\n
Last week, the bank disbursed US$300 million of the blocked
\n$600 million loan package destined for the country's social
\nsafety net program.<\/p>\n
And earlier this week, the World Bank, which led meetings of
\nIndonesia's donors grouped in the Consultative Group on Indonesia
\n(CGI), pledged $1.5 billion in loans to help fill the
\ngovernment's 2000 budget gap.<\/p>\n
Severino said support to Indonesia also came from the Asia-
\nEurope Meeting (ASEM) funds, which had extended 20 grants
\ntotaling $7.5 million of its $42 million to Indonesia.<\/p>\n
The money from the ASEM fund was used to provide education
\nscholarships and grants to poor children as part of the national
\n\"Stay in School\" program, to help set up the social monitoring
\nand early response unit (SMERU), and to provide start-up funds
\nfor the Community Recovery Program, a non-governmental
\norganization-led safety net for the most vulnerable, which
\nchannels assistance to grassroots organizations across the
\ncountry. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/wb-retains-1-advanced-fee-on-loans-despite-ri-concern-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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