Mar'ie joins bandwagon of rage against ABD loan policies
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)