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.