Mar'ie joins bandwagon of rage against ABD loan policies
JAKARTA (JP): Minister of Finance Mar'ie Muhammad, in France for the annual meeting of the Asian Development Bank (ADB) yesterday blasted the bank's lending policy in the previous year.
Mar'ie's statement, made available to the local press yesterday, was part of a bitter row that developed between donors and Third-World borrowers on the second day of the conference.
Indonesia was the ADB's biggest borrower in 1993 with a total of US$1.3 billion.
The minister said that ADB's 3.3 percent increase in lending last year just "barely kept abreast of inflation."
"The bank's lending capacity falls well short of the development requirements of its non-concessional borrowers, which face the urgent need to incorporate new technologies and build essential infrastructure," Mar'ie said.
ADB president and former Japanese finance minister Mitsui Sato said on Tuesday that the bank now has "very low lending headroom" because of the lingering capital negotiations.
ADB's miniscule growth in annual lending last year was primarily caused by the United States', with Japan the bank's main donor, reluctance to release capital to the bank, especially to the bank's concessional Asia Development Fund (ADF).
ADF loans are larger than other conventional ADB loans and are appropriated according to a schedule set by donor governments. The last ADF replenishment raised US$4.2 billion for 1992-95.
Analysts estimate that talks on ADF, which might start informally this year, will cause even more heat between donors and borrowers than what's being seen in Nice.
"With respect to the ADF, net resource transfers to ADF- eligible members rose by only one percent in 1993," he said. "..we hope this situation can be improved."
The minister, referring to the protracted procedures for the last ADF, also said that "it is not too early to begin negotiations this year on ADF replenishment."
Mar'ie also appealed to the bank to remedy the situation by "serving as a catalyst to attract private sector funds to co- finance various activities."
Conditionality
The minister also criticized the Bank's new loan conditions.
ADB has increasingly supported the donors' demands for greater transparency and accountability within borrowing countries under the label of "good governance."
"The borrowing members represent a large and diverse group of sovereign nations, each with its own unique culture and history," Mar'ie said. "It is impractical and unrealistic to try to devise an all embracing set of policies for all member countries."
The new conditions have been denounced as "cultural imperialism" by borrowers, led by China and India, who nevertheless, like Indonesia, are looking to the bank's capital increase to meet their growing needs in the face of shrinking development aid.
Mar'ie also appealed to the Bank to help provide Indonesia with financial and technical assistance to deal with the country's environmental problems.
The minister admitted that "much of the blame for past environmental degradation rests with the government."
"It is the responsibility of policy makers to correct market failures, to ensure that polluters face the full costs of their actions," he said.
Yen rate
Touching upon the yen rate, Mar'ie urged the ADB to help its borrowers hedge against the exchange rate risk stemming from the yen rise against the dollar.
He said "the recent swing in the dollar-yen exchange rate has raised repayment costs" for loans denominated in yen.
The bank, using its own resources "could undertake the complicated task of dealing with exchange rate fluctuations," he said, noting that the bank appears "better positioned" to help borrowers with "such complex dealings."
Ma'rie said this issue was "perhaps even more worrisome" than the continued high cost of ADB loans.
On this point, he said the ADB should "make every effort to take advantage of low world interest rates" to reduce the cost of funding and pass the savings on to borrowers. (04/vin)