Donors ready to extend loans despite rising criticism

Wahyoe Boediwardhana, The Jakarta Post, Denpasar, Bali

Indonesia's traditional foreign lenders, from the Consultative Group on Indonesia (CGI), will start a two-day meeting on Tuesday on the resort island of Bali to determine a new loan facility for the country, as non-governmental organizations (NGOs) voice strong criticism against the creditor grouping.

"What needs to be done now is to ensure the effectiveness of the loans. Will the money help improve the welfare of the people and stimulate (economic) development?" asked Binny Buchori, executive secretary of the International NGO forum on Indonesian Development (INFID), a grouping of several NGOs, at a media conference here on Monday.

INFID has been a strong critic of foreign donors, which have provided a huge amount in loans to the country for many years, but have largely turned a blind eye to massive misuse of the loans, particularly during the past.

CGI was established by the World Bank in 1992, and each year the donor grouping held a meeting to provide Indonesia with fresh loans to help finance the state budget deficit.

CGI coordinator the World Bank previously said that Indonesia would need US$2.4 billion to $2.8 billion in fresh loans for this year.

But INFID said that the CGI loans had little benefit in stimulating economic development in the country because the grouping had acted merely as a creditor rather than development forum.

Binny said that this had to change through the establishment of an independent panel that would determine what policies should be adopted by CGI.

She added that supervision and evaluation of the loan program had to be strengthened to minimize corruption or "leakage".

INFID is a prominent NGO grouping, which, for a long time, has campaigned for Indonesia to be granted debt forgiveness on the grounds that most of the foreign loans received had been misused by the previous government.

The grouping is planning to stage a happening art event on Tuesday at the amphitheater at Nusa Dua, Bali, as a form of protest demonstration to the CGI forum.

"We'll hold a happening art event with the theme of debt reduction. About 500 people will participate in it," said INFID official Chris Wangkay.

Earlier on Sunday, at least three youth and student organizations held demonstrations in Yogyakarta, where donor representatives had gathered for a premeeting session.

Police fired warning shots and beat the protesters.

Representatives of the foreign donor countries and institutions are expected to talk about the country's progress in implementing key reform measures.

The World Bank praised Indonesia's efforts last week in pushing through reform programs, although it expressed dissatisfaction over a tendency toward protectionism in trade policy, particularly with respect to rice.

Recommended reform programs include the sale of various banking assets currently under the Indonesian Bank Restructuring Agency, and commitment to privatization of state-owned enterprises.

Topics will not only focus on reform programs but donors will also consider how to rebuild Bali and strife-torn Aceh. The former's economy, heavily dependent on tourism and the country's principal tourist attraction, suffered dearly after the Oct. 12 terrorist bombing incidents.

Donor support for Aceh, which suffered from a decades-long conflict between the Military and separatist guerrillas, followed last month's landmark deal for peace.

The government is now seeking a lesser amount in CGI aid in a bid to reduce further the country's dependency on foreign loans.

With sovereign debt currently amounting to about $70 billion, such a move is regarded as crucial to ensure sound fiscal management.