ADB links Indonesia aid to reform, better governance

ADB links Indonesia aid to reform, better governance

MANILA (Agencies): The Asian Development Bank (ADB) said on
Saturday it was prepared to lend Indonesia between US$600 million
and $1.2 billion a year over the next three years, provided the
government pressed ahead with key reforms.

Indonesia must boost its efforts to reduce poverty, strengthen
governance and improve macroeconomic stability, the Manila-based
multilateral institution said, if the country is to qualify for
assistance at the top end of the lending range.

Other conditions to qualify Indonesia for assistance at the
higher end of the lending range are resolving problems in
decentralization, including giving more authority to local
governments and improving the implementation of ADB projects.

The conditions are part of the new "country operational
strategy" for Indonesia approved by the ADB earlier last week.

The bank did not give details on the specific criteria it was
setting for Indonesia nor did it say to what extent it would cut
loans if they were not met.

Indonesian Coordinating Minister for the Economy Rizal Ramli
said earlier on Friday his country welcomed the new strategy and
called for the ADB to provide a higher level of its concessionary
resource, the ADB Special Fund, for programs focusing on poverty
reduction and balanced growth.

"The ADB would be flexible and responsive to the country's
changing political and economic conditions over the next three
years and continue to support policy reforms," ADB's director for
Indonesia mission Jan van Heeswijk said in a statement.

"However, without improved governance, ADB's programs will not
have a sustainable impact on poverty."

Indonesia would also need to do more to improve the
implementation of ADB projects to make more efficient use of
lending resources, the statement said.

The ADB said the loan package was part of its new country
strategy for Indonesia, which focuses on the need for policy
reforms.

Indonesia borrowed about $1.2 billion annually before a
devastating economic crisis hit Asia in 1997. During the crisis,
lending commitments increased substantially to $1.8 billion in
1998 and $1.5 billion in 1999, the bank said.

Jakarta has borrowed nearly $17.7 billion to finance key
development projects, it added.

The ADB also said it plans to sign a poverty-reduction
partnership agreement with Indonesia to improve the bank's new
country strategy.