Govt signs new agreement with ADB

JAKARTA (JP): The government signed on Thursday a new cooperation agreement with the Asian Development Bank (ADB) which will pump hundreds of millions dollars in soft loans into poverty-alleviation programs in Indonesia.

The agreement was signed by Coordinating Minister for the Economy Rizal Ramli and ADB vice president Joseph Eichenberger.

The Manila-based multilateral lending institution has promised to provide Indonesia with between US$600 million and $1.2 billion in assistance per year over the next four years until 2004, contingent upon the government's commitment to reforms.

ADB has said that around 40 percent of the loan would be allocated for poverty reduction in Indonesia.

ADB Jakarta representative Jan Van Heeswijk said that the bank's commitment for 2001 was $1 billion, of which $350 million to $400 million was earmarked for poverty alleviation projects.

According to a media statement issued by Rizal's office, the new partnership agreement is based on the vision that economic growth must be focused on improving the welfare of the poor, and that a transparent and accountable administration system must be developed to help reduce poverty to a minimum.

Rizal said that the government was making preparations to launch a new poverty reduction agency to be led by prominent agriculture economist H.S. Dillon.

The agency will be charged with developing operational strategies for poverty reduction in the country, which has a population of over 200 million people. The agency will support an interministerial committee chaired by Vice President Megawati Soekarnoputri.

Rizal recently said that poverty reduction was the government's top priority as about one-fifth of the population was classified as extremely poor and another fifth was vulnerable to falling back into poverty.

He explained that the country's economic crisis, which started in the middle of 1997, had dramatically increased the incidence of poverty to 25 percent of the population by the end of 1998 from just over 11 percent in 1996.

He said that the government's macroeconomic and structural reform programs as well as social safety net measures to help protect the poor from the economic crisis had been able to reduce the poverty level to 23 percent of the population by August 1999.

ADB is one of Indonesia's traditional lenders. The bank warned earlier this year that it might cut lending to the country unless the government pressed ahead with key economic reforms.

The warning came after the International Monetary Fund (IMF) delayed the disbursement of its next $400 million loan tranche to the country late last year amid signs that the government was wavering in its resolve to introduce key economic reforms. The IMF loan is crucial because the disbursement of other international assistance depends on it.

But ADB said recently that its poverty reduction loan to the country would not be affected by relations between the government and the IMF.

The IMF is expected to send a mission here next week to review the country's economic reform program as the basis to decide upon the disbursement of the stalled tranche. (rei)