Japanese aid to rise to $1.97b

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)