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)