World Bank to speed up loan projects after Bali

The Jakarta Post, Jakarta

The World Bank plans to accelerate the disbursement of project-related loans in areas where revenue from the tourism sector is likely to fall, in one of the Bank's initiatives to help Indonesia cope with the impact of the Bali terrorist strike.

World Bank country director Andrew Steer said on Thursday that the loans could amount to between US$400 million and $500 million, with disbursements possibly spread over next year rather than later.

"These are injections of resources that will create jobs and generally be helpful in times when there'll be layoffs," Steer told The Jakarta Post in an interview.

He said Bali would also likely receive loans from projects for which it was previously not eligible because of its relatively more advanced economy.

One example was the Kecamatan (regency) Development Project (KDC), which provided small-scale investments for projects that local communities rather than the Bank or the government initiated, Steer explained.

He said that the KDC projects required only small investments of about $10 million to $20 million for the construction of roads, water-supply networks, schools and clinics.

"We could say Bali is eligible as there are other areas where tourism is strong ... we would then open that facility to those areas for the next year," he said.

Bali is facing tough times ahead as tourists will likely stay away from the island following the recent bomb attack that killed at least 182 people, mainly foreign tourists.

Bali has been a favorite tourist destination, generating about one third of the some $5 billion a year the tourism sector contributes to the economy.

Now many expect the impact of the terrorist strike to spill over to tourist spots across the country. The island was long regarded as a safe haven amid the numerous armed conflicts around the country, including bomb blasts and violent protests in Jakarta.

Steer said getting the World Bank projects on the ground faster would mitigate the impact of fewer tourist arrivals while also helping offset the overall slump in investment because of low business confidence.

Economists have revised downwards their forecasts for this year's economic growth target, now discounting revenue from the tourism sector.

The government is following the move with plans to revise the budget assumptions for its state budget next year.

For the same reason, the foreign creditor countries in the Consultative Group on Indonesia (CGI) have decided to postpone their annual meeting to pledge aid for Indonesia's 2003 budget needs.

The CGI and the government would, however, meet informally later this month to discuss the implications of the Bali attack and ways of helping Bali cope with the tragedy.

"We can help the government think through the impact and there are possible options; we have some experience of bad events happening in other countries."

He said the Bank could also help explain to the global business community about the economic impact of the Bali blasts, stressing that "these are problems but problems with solutions."

"I think we can play a viable role there as a CGI chair and in general as the World Bank Group, including the IFC (International Finance Corporation)," he said, referring to the World Bank's commercial lending arm, which uses its investments to stimulate economic activities in developing country.