SSN tangled up in bureaucracy

SSN tangled up in bureaucracy

By Nurina Widagdo

WASHINGTON (JP): Indonesia's social safety net (SSN) program,
introduced under a financial bail-out package of the
International Monetary Fund (IMF), has not managed any
significant achievements due to the disorientation of the
bureaucracy.

The bureaucracy has become disorientated since the change in
the country's top leadership in May 1998, which was not followed
by a change in the bureaucracy itself. Bureaucrats, as a result,
have no vision of how the economic crisis and reform have changed
the situation, and business, therefore, goes on as usual for many
of them and corruption is still widely found.

According to the Directorate General of State Budget at the
Ministry of Finance, the first phase of the government's SSN
program was supposed to be completed by the end of this fiscal
year, which is due this month. But only 70 percent of the SSN
budget of US$2.1 billion has thus far been disbursed, and out of
this, less than half has reached targeted groups. Given such a
situation, the government is to extend the program until June.

There are two key issues in the SSN program that deserve
attention.

First, the government has not demonstrated adequate
performance in handling the planning, implementation and
monitoring of the program. Various field data and observations
demonstrate the failure of these SSN activities as well as the
misuse of the funds. There has also been a concern that the
program covers too broad an area and does not address the real
needs of those requiring the social safety net.

Second, as a general election is scheduled for June 7, there
has been a strong indication that the SSN activities and funds
have been redirected in such a way as to benefit the Golkar
ruling party and particular political groups. Many people have
suspected that the slow movement of the SSN funds is part of a
strategy to use them for the party's election campaign in May.

It is important to note that a major portion of the current
state budget comes from foreign aid in the form of fast-
disbursing adjustment loans from the IMF, the World Bank, the
Asian Development Bank and other donors.

It would, therefore, be fair to say that the SSN program has
failed to meet one of its objectives -- safeguarding the poor
from the severe impact of the economic crisis.

In the meantime, donors are planning new adjustment loans
which are supposed to have been better prepared than the ones
approved and disbursed last year. The World Bank, for example, is
appraising two new loans worth $1.1 billion, one of which is
called the Policy Reform Support Loan II and the other the Social
Safety Net Adjustment Loan. Both are expected to receive approval
from the World Bank's board of directors in late April or early
May and to be disbursed about a week after the approval.

However, the new World Bank loans should raise two questions
of concern. The first is whether Indonesia needs more money if a
significant amount of the current SSN funds has not been used up
and whether the government has the capacity to implement new SSN
activities if its current program is not performing.

While the World Bank is imposing conditions on the government
for the approval of the new loans -- one of these is the
implementation of a tighter monitoring system -- it is unlikely
that the government will disburse the new loans by June in an
accountable manner.

The second is whether the government might misuse the new
loans to support the ruling party's 'money politics'. Money
politics is the term used in Indonesia to refer to money
distributed by political parties and groups to buy votes. The
modes of channeling the money vary, such as direct distribution
of money, free distribution of staple foods, and provision of
easy access to credits for cooperatives and small enterprises.

To at least reduce the possibility of implementing money
politics, there should not be any new foreign public loans
disbursed before the election. In this way, the donors, including
the World Bank, can contribute to the democratization process in
the country.

Another concern is the possible impact of the new adjustment
loans. There are at least three issues related to public interest
that are not being properly addressed in the raising of
adjustment loans.

First, there is no clear procedure on how the public can have
access to influence the preparation of adjustment loans. The
public access to this process seems to be on an ad hoc basis and
it really depends on whether or not the donors would provide the
access to the public. For example, there is no access for the
public to influence the matrix that is developed as a condition
for the loans. There is no clear policy as to whether public
consultation on the proposed loan is mandatory; and if public
consultation is required who actually is the target audience of
the public consultations. Neither is there any clear policy on
information disclosure regarding adjustment loans. While all
multilateral banks, including the World Bank, apply information
disclosure policies to their project lending, this is not
applicable to adjustment lending. There is no mechanism that
allows the public to file a concern or complaint to the World
Bank's board of directors before a new adjustment loan is
approved.

Second, there is no requirement for the donors to conduct
social and environmental impact assessment for their adjustment
loans, while adjustment lending, in many aspects, does have
adverse impact on the people.

Third, the monitoring of adjustment loans relies heavily on
the honesty of the government. An independent monitoring team can
be set up or non-governmental organizations can be involved in
the monitoring, but the coverage of adjustment loans is so huge
that it is basically only the government that can provide the
data on the implementation and the matrix fulfillment. At the
same time, we are all aware that there is a significant question
on governance issues in Indonesia.

Adjustment loans, by nature, are not expected to support the
democratization process in the borrowing countries. There are no
policies and guidelines that provide opportunities for public
participation. In the Indonesian context, adjustment loans are
not necessarily the one solution to the economic crisis,
especially when the crisis has led to political and security
crises. There will be no solution for the economic crisis if the
political crisis has not been solved. If governance is a priority
for the World Bank -- referring to the Comprehensive Development
Framework that World Bank President Wolfensohn has recently
talked about -- it would be sensible for the bank to consider how
lending can contribute to or undermine the process of governance
improvement and human resource development in a broader sense.

The writer is manager for Asia projects of Bank Information
Center, a Washington-based watchdog group.