WB considering $1b in aid for RI

WB considering $1b in aid for RI

JAKARTA (JP): The World Bank Executive Board is preparing to
meet in Washington soon to consider a proposed US$1 billion
policy reform support loan to Indonesia, a senior executive says.

The World Bank's country director for Indonesia, Dennis de
Tray, said here yesterday that the loan would help Indonesia
reform its financial and banking sector, improve corporate
governance and help meet a set of urgent social needs, such as
subsidizing staple foods.

He said that the recovery loan would cover efforts to help
finance the importation of staple goods such as rice, soybeans,
wheat, wheat flour and sugar for poor and hungry Indonesians.

De Tray said that Indonesia's worsening economic problems,
combined with the severe drought, was threatening to push as many
as 50 million Indonesians into poverty.

"Tens of millions of desperate people are counting on all of
us to do everything we can to help them," de Tray said.

"It's a huge task and no one can hope to do it all, but
there's a tremendous will in Indonesia and among donors to take
urgent steps to protect those worst hit," he added.

He said the country's economic crisis was expected to leave at
least 20 million jobless, or about 21.8 percent of the total
workforce; ethnic strife could escalate as poverty grows,
disrupting the economic distribution system, petty crime will
increase, women are expected to a bear a heavier burden and 20
percent of school children are at serious risk of dropping out of
school as a response to shrinking family incomes.

"The economic crisis in Indonesia has led to other severe
social problems which need special attention," he said.

The World Bank said that the $1 billion loan would also be
used to strengthen overall environmental management and promote
sustainable environmental practices at a time when renewed
poverty was set to place additional pressures on Indonesia's
precious natural resources, such as tropical forests.

The World Bank has pledged a total of $4.5 billion to
Indonesia over the next three years in response to the financial
crisis and the country's ongoing development needs. The $1
billion support reform loan is part of this $4.5 billion package,
$2 billion of which is to fund economic reforms -- including
money for humanitarian needs -- with the remaining $2.5 billion
funding project loans with an emphasis on poverty alleviation and
social investment. This loan is in itself a part of the $43
billion bailout fund arranged for Indonesia by the IMF last
November.

The World Bank also announced a social safety net fund to
support the hungry and the sick with "tens of millions of dollars
a year in international donor grants," and a $390 million
national education campaign to help keep an estimated 25 million
Indonesian children in school in the next five years.

About $292 million of the $390 million fund would be drawn
from the existing or proposed World Bank education projects,
while the other $98 million would be contributed by the Asian
Development Bank (ADB).

He said that the Consultative Group on Indonesia (CGI), which
will convene in Paris at the end of July, would focus their
agenda on social safety net programs and the overall program to
finance Indonesia get rid of its crisis in the years to come.

"Basically these are the two issues that are going to be the
focus of the meeting next month," he said.

He said the World Bank, which chairs the CGI (Indonesian
creditor consortium) was considering shifting the group's aid out
of development projects into government programs to address the
country's economic crisis.

"As the condition worsens here, we are tending to move our
focus away from project support towards program support, which is
where the government needs it most," de Tray added.

He said the upcoming meeting would be different from the
previous ones in the way that it would pledge support for
government programs.

"The consultative group has been a financing mechanism for
development projects in the past but now it will pledge support
for government programs," he said.

He declined to mention the amount of aid to be pledged by the
CGI donors package, but he said it would be large.

" The World Bank and other donor countries are trying to pull
together efforts to support the Indonesian people," he said.

"Indonesia's problems are particularly severe and I think
donors recognize that, and in that perspective you can expect
Indonesia to receive a fair share of attention," he added.

He noted the country's crisis was caused by many factors,
including the regional crisis, the political crisis and its own
financial crisis, which have caused other social problems.

The CGI, formed in 1990 to replace the Dutch-chaired Inter-
Governmental Group on Indonesia (IGGI), groups all former members
of IGGI, minus the Netherlands, and five new creditors -- South
Korea, the Kuwait Fund for Arab Economic Development, the Saudi
Fund for Development, the Nordic Investment Bank and the Islamic
Development Bank.

Other creditor members of CGI are Australia, Austria, Belgium,
Canada, Denmark, Finland, France, England, Germany, Italy, Japan,
New Zealand, Norway, Spain, Sweden, Switzerland and the United
States. (aly)