Japanese aid to rise to $1.97b
JAKARTA (JP): The Japanese government will increase its concessional loans to Indonesia from the 158 billion yen last fiscal year to 168 billion yen this year and will cut the interest rates on the loans to 2.5 percent per year, an official at the Japanese foreign ministry in Tokyo said.
The new loans, popularly known as official development assistance (ODA), will be pledged by the Japanese delegation at the two-day annual meeting of the Consultative Group on Indonesia (CGI) which opens in Paris today.
The foreign ministry official who insisted on anonymity told the Tokyo correspondent of the Jakarta-based Gatra newsweekly, Seiichi Okawa, that the new aid would be 6.3 percent larger in terms of yen but 18 percent larger ($1.97 billion) in terms of U.S. dollars due to the sharp appreciation of the yen against the greenback.
"A new element in the commitment is that 25 percent of the total aid will be allocated for projects related to environmental protection and this portion will bear an annual interest rate of only 2.3 percent," the official added.
Last year, Japan pledged to Indonesia the equivalent of $1.67 billion in new aid or 32.2 percent of the $5.2 billion total aid commitments from the CGI creditor group.
About $200 million of the Japanese aid last year was pledged in the form of fast-disbursing assistance which can be used for local-cost financing.
The World Bank, the coordinator and chair of the CGI meeting, suggested in its 1995 report on Indonesia that the creditor group pledge new assistance minimally at the level of last year's $5.2 billion.
"For fiscal year 1995-1996, we will still pledge $200 million in fast disbursing aid to help Indonesia cope with the impact of the yen's appreciation," he said.
The official said Indonesia, as a lower-middle income country with a per capita income of $696, should actually be charged an annual interest rate of 2.7 percent under the new Japanese ODA policy.
"But as a reflection of our concern over the impact of the yen's appreciation on Indonesia we will charge only 2.5 percent and only 2.3 percent specially for environmental projects," he said.
New features
The official added that other new features of Japan's aid program included the allocation of 10 billion yen for financing overseas scholarships for students and 20 billion yen for the rehabilitation or building of 600 secondary schools in 12 provinces to support the compulsory nine years education program.
He reaffirmed that Japanese aid to Indonesia would place a greater emphasis on human resource development (especially education), the preservation of the environment and regional development.
"But we will refrain from financing projects such as irrigation dam construction which require the eviction of a large number of people," he said.
According to the official, financing projects which caused friction or conflict with the local people at project sites would only hurt the credibility of Japan's ODA program.
He said that the four principles which were the fundamental guidelines for Japan's ODA were the protection of the environment, the protection of human rights, democratization and demilitarization.
In this context, the official said, the Japanese government also took into account Indonesia's procurement of used military ships from the former East Germany.
On June 4 Japan's Asahi daily reported in Tokyo that the Indonesian government had reduced spending for the purchase of used military vessels from the former East Germany out of fear that the spending might be questioned by Japan with regard to its ODA.
Asked whether the newspaper's story reflected real Japanese pressure on Indonesia, the official said he simply could not ascertain whether the Indonesian decision to slash its budget for the ship procurement had been related to the principle of the Japanese ODA.
"But we did take into account Indonesia's spending on the used military vessels," he said.
The official said the Japanese delegation would, for the first time, raise express grave concern at the CGI meeting over and the rapid and steep increase in Indonesia's commercial borrowings.
"We will call for restraint in new, short-term commercial borrowing by the Indonesian private sector," he said, referring to the speech to be delivered by the Japanese delegation at the CGI meeting in Paris.
Latest official figures put Indonesia's external debt at approximately $100 billion, of which $58 billion is official borrowings (mostly on concessional terms) and $42 billion private sector debts (short-term commercial loans). (vin)