Donors ready to extend loans despite rising criticism

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.