WB approves $400m loans to Indonesia

JAKARTA (JP): The World Bank announced in Washington on Tuesday its approval of US$400 million in new loans to Indonesia for the country's poverty alleviation and water resource improvement programs.

World Bank's country director Mark Baird said the loans were an important part of the bank's program of support to Indonesia.

"The Urban Poverty Project (UPP) is so important because it is all about building communities and empowering people," said Baird in the bank's latest statement.

Of the $400 million, approximately $100 million was allocated to UPP, which targets people who were poor before the financial downturn began and suffered more due to high inflation or loss of income.

The bank said UPP encourages urban communities to develop investment priorities to generate employment and income and build public infrastructure through labor intensive methods.

Funds for small public infrastructure works will be distributed through grants, while funds for economic activities will have to be repaid within a year at a commercial rate and repay schedule reflected by the cash flow of the financed activity.

The remaining $300 million was given as a Water Resources Sector Adjustment Loan (WATSAL), an integrated program of policy, institutional, management and regulatory reforms in the water resource sector.

The bank said that the proposed reforms represent a new way of doing business in the water sector of Indonesia.

In conjunction with the reforms, Indonesia will also adopt a National Water Resources Policy, which will be implemented and coordinated by a new institution, an interministerial National Water Council, the bank said.

The World Bank's approval of the $400 million loan comes almost at the same time Indonesia starts its 16-day election campaign period. This has sparked criticisms from government opponents in Indonesia and development activists in Washington as well as the U.S. government.

American economist Jeffrey Winters was quoted by Antara on Tuesday expressing his concern that the loans might only be utilized by the ruling party Golkar during the campaign and general election scheduled for June 7.

"It (the approval of the loans) will be just the same as though (the World bank) gives campaign funds to Golkar Party," he said, adding that Golkar might use the money to support its attempts to maintain the status quo.

The World Bank's board will consider on Thursday two additional adjustment loans, the $600 million social safety net adjustment loan and the $500 million policy reform support loan II.

The loans are part of a broad program of external assistance provided by the International Monetary Fund, the World Bank, the Asian Development Bank and bilateral donors to Indonesia. (cst)