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Down to Earth IFIs Factsheet Series

No 34, July 2004: The Asian Development Bank


IFIs in Indonesia

This series of monthly factsheets on International Financial Institutions (IFIs) will include information on the World Bank Group, the International Monetary Fund (IMF) and the Asian Development Bank (ADB), focussing on their involvement in Indonesia.


The Asian Development Bank


The Asian Development Bank (ADB) was founded in 1966 with the aim of supporting social and economic development in the Asia-Pacific. Funds are sourced from members states, loans from global capital markets and from the Banks own income.

The main functions of the Asian Development Bank are to:

The ADB headquarters are based in Manila. ADB membership is made up of 63 states, 45 of which are from the Asia-Pacific and 18 of which are from Europe and North America. The biggest shareholders are the United States and Japan, and the biggest borrowers are Indonesia and China. The Transport and Communications sector receives the greatest amount of support, followed by the Energy sector, Social Infrastructure, Multi-Sector borrowing, Agriculture and Natural Resources, Industry, Finance and Non-Oil Extraction. The ADB makes loans of around US$ 6.1 billion per annum. In addition to loans, the ADB also provides funding for technical support in the region of US$ 176. 5 million and grants in the regional of US$ 483.5 million.

Strategy and Policy Dialogue

The goals of the ADB are outlined in its "2002 Country Assistance Strategy" which is aimed at reducing poverty and regional inequity by increasing good governance, responding to local needs through decentralization, human resources capacity building, environmental management, the promotional of sustainable natural resource management and increasing the prospects for long-term growth. This strategy is to be implemented until 2006. The ADB is also increasingly emphasizing the importance of coordination with other multilateral agencies.

The ADB is also expanding its strategy to cooperate with governments, particularly in connection with governance, efficacy of loans and decentralization. ADB support of good governance doesn't only encourage public accountability and transparency, but also promotes good governance in the business and finance sector. The ADB also heads the donor working group on funding efficacy which focuses on assessing the client nation's need for external funding and associating it to funding efficiency in design and implementation. Increasing the policy climate and investment from the private sector also remains one of the ADB's priorities.

As with the World Bank, the Asian Development Bank still has a much better record if compared to the IMF in the matter of consultation with the people. NGOs are able to force meetings with mission delegates, highlight policies or targets that have yet to be implemented and problematic policies, and submit policy suggestions that should be included. Moreover, in order to increase the tripartite collaboration between the ADB, the Government and NGOs, the ADB has established a framework for collaboration entitled, "ADB-Government-NGO Cooperation: A Framework for Action, 2003-2005". Further information, also in Indonesian, is on the ADB website.

Unfortunately however, as with other International Financial Institutions, the ADB applies a policy of conditionality on its loans. These conditions usually include privatization, deregulation and support for foreign investment. Critics emphasize the fact that policies such as these rarely have much of a role in poverty reduction or environmental protection, which is the original aim of ADB intervention. Critics of the good governance agenda - which is the most popular focus of the donor agencies - also state that this agenda aims at creating institutions that support capitalisation.

Loans to Indonesia

Up until 31 December 2003, the cumulative loans made by the ADB to Indonesia totalled US$ 19.36 billion. The largest part of the USD loans are for the social infrastructure sector, but a large part has also gone to the Agriculture and Natural Resources sector as well as the Energy sector (see Table 1).

Table 1. ADB Cumulative Loans 31 December 2003.

Sector Total loan Loans in US$ billions % of total loans made
Social Infrastructure
69
4,6877
24.2
Agriculture and Natural Resources
100
4,0187
20.8
Energy
30
3,4311
17.7
Finance
12
3,0870
15.9
Communication and Transport
31
2,5449
13.1
Multisector
15
0.7167
3.7
Industry and Non-Oil Extraction
7
0,689
3.6
Others
5
0,1828
0.9
TOTAL
269
19,3578
100.0


Joint Financing

The ADB also has additional funding that it obtains via joint financing with other institutions, particularly from the private and formal sectors as well as export credit institutions. In 2003, cooperation totalled US$ 2.42 billion for 28 loan projects plus US$ 471.93 million in the form of grants and technical assistance that was used to fund 89 projects. Financing from these other sources is substantial: from 1970 to the end of 2003, total financing was US$ 40.64 billion for 637 loans and US$ 1.055 billion in the form of grants and technical assistance, used to finance around 590 projects.

Six ADB projects in Indonesia have been financed by the private sector between 1 January 1999 and 31 December 2003, to a total of US$ 733.8 million. Financing from the private sector has been used in the main for the energy restructuring programme (see Table 2) to the tune of US$ 400 million.

In addition, there are still 23 other projects that have been financed by the private sector in the form of technical assistance or grants, totalling US$ 37. 94 million.

Table 2
Projects Financed in Collaboration with the Private Sector 1 January 1999-31 December 2003
Project
ADB Loans in US$ million
Financing from other sources in US$
Health Services Decentralization stage II
100,00
5,00
Participatory Irrigation sector
73,00
15,00
Export oriented small and medium scale business sector
85,00
5,00
Institutional capacity building towards Decentralization
42,20
8,80
Health and Nutrition Programme development
300,00
300,00
Energy sector restructuring
400,00
400,00
Total
1000,2
733,8


Contractors/ Providers involved in ADB Projects in Indonesia

There are 10 contractors in Indonesia that are involved in the big loan projects in Indonesia (see Table 3).


Table 3
Indonesian Contractors/Providers involved in ADB loan projects 1 January 1999-31 December 2003.
Contractor/Provider
Sector
Contract Value in US$
Pt. Arya Sada Perkasa Energy
26,54
Pt. Triyasa Nagamas Farma Social Infrastructure
15,85
Nacap-Thiess Joint Venture Energy
14,50
Pt. Gizindo Prima Nusantara Social Infrastructure
12,88
Pt. Arhiza, Pt. Tehate, Pt. Voksel JV Energy
12,00
Pt. Wijaya Karya Agriculture and Natural Resources
11,86
Pt. Hutama Karya Agriculture and Natural Resources
11,36
Pt. Sac Nusantara Agriculture and Natural Resources
10,69
Pt. Pembangunan Perumahan Others
10,12
Pt. Adhi Karya (Persero) Social Infrastructure
8.72


Performance of ADB Loans

Senior Environmental Defense Fund Researcher, Stephanie Fried, has written a report that states that more than 70% of the total ADB loans made to Indonesia have not succeeded, have not been beneficial and, moreover, may be considered dangerous. Fried believes that this figure demonstrates the failure of ADB investment to provide long-term economic and social benefit for the Indonesian people. In 2000, Indonesia's debt to the ADB totalled US$ 16 billion.

The Asian Development Bank itself rejects this report. According to the ADB, the majority of its projects are not problematic. "It is not easy to define whether a project has been a success or not, especially in a country as large as Indonesia. We are also dissatisfied if we find out that there is a project with problems," said the Director of the ADB Representation in Indonesia, David Jay Green, in Jakarta on Monday 24 May 2004.

Green stated that of all the ADB projects in Indonesia, around 90 percent rank A, B and C, while the remainder rank D to F. Of this 90%, between 50-70% rank A and B.


Permanent ADB Office in Indonesia:
Director for Indonesia: David Jay Green
Address: 7th floor, Gedung BRI II,
Jl. Jend Sudirman, Kav. 44-46,
Jakarta 10210, Indonesia
Telephone: + 62 21 5798 0600
Fax: + 62 21 5798 0700
Indonesia Website: http://www.adb.org/IRM
E-mail adbirm@adb.org
Postal address P.O Box 99, JKPSA, Jakarta 10350 A, Indonesia
ADB Public Information Unit Open to the public (appointment by phone): Monday-Friday: 08.00-12.00 and 13.00-16.00 Telephone: + 62 21 251 2721 or 5798 0661
Information about the ADB is also available in libraries that are affiliated with ADB Indonesia Airlangga University
Contact: Ms. Ratnaningsih, Head Librarian
Jalan Darmawangsa Dalam, Surabaya 60286
Indonesia

Faculty of Economics, University of Indonesia
Contact: Sri Suyatni, Head Librarian
Kampas Baru, University of Indonesia
Depok 16424, Indonesia

Gajah Mada University
Kontact: Mrs. Murianti, Head Librarian
Bulaksumur, Yogyakarta 55281, Indonesia

University of North Sumatra
Contact: Mr. A. Ridwan Siregar
Jalan Perpustakaan 1
Kampus USU, Medan 20155, Indonesia

Padjajaran University
Contact: Atty. Murniati, Head Librarian
Jalan Dipati Ukur No. 46A/No.35
Bandung 40132, Indonesia


ADB Headquarters:
Address: 6 ADB Avenue, Mandaluyong City, Metro Manila, Philippines
Tel. + 632 632 4444
Fax. + 632 636 2444
Main Website: http://www.adb.org
E-mail information@adb.org
ADB Publication Unit Email to adbpub@adb.org or fill in a request form from www.adb.org and fax to + 63 2 6362648 or post to: Publications Unit, ADB, P.O.Box 789, 0980, Manila, Philipina.
NGO Center and Cooperation Network Established in February 2001 in order to strengthen collaboration with NGOs and respond to criticism and suggestions from NGOs concerning ADB projects.

Head: Robert Dobias

NGO Senior Specialist: Hermanta Mishra, particularly for Transport, Energy and Environment sectors.

NGO Specialist: Grant Curtis, focuses on NGO institutional capacity development particularly for social issues and governance/civil society.

NGO Liaison: Bart W. Édes, manages ADB communications with NGOs.

Further information at: http://www.adb.org/NGOs/ngocenter.asp


Sources:
http://www.adb.org
http://www.adb.org/irm
http://www.adb.org/NGOs/ngocenter.asp
http://adb.org/Environment/reports.asp

Documents in Indonesian may be found at:
http://www.adb.org/Documents/Translations/Indonesian/default.asp

These include:
Kebijakan Komunikasi Publik Bahasa
Kebijakan Antikorupsi [ PDF: 560kb | 88 pages ]
Kebijakan ADB mengenai Gender dan Pembangunan PDF: 906kb | 56 pages ]
Buku Pegangan untuk Pemukiman Kembali
Kebijakan Pemeriksaan ADB [ PDF: 144kb | 45 pages ]
Andapun dapat bersuara [ PDF: 54kb | 9 pages ]
ADB-Government-NGO Cooperation: A Framework for Action, 2003-2005 [ PDF: 483b | 38 pages ]
Cara-cara Partisipasi: Pengalaman dari RETA 5894: Kegiatan Pembinaan Kapasitas dan Partisipasi II [ PDF: 621 kb | 46 pages ]

Jakarta post, Wednesday, 19 May 2004 Media Indonesia, Wednesday, 26 May 2004

Further reports concerning the evaluation of the ADB carried out by Stephanie Fried may be found at: http://www.environmentaldefense.org/documents/2467_EvaluatingADBIndonesia.pdf

This factsheet is a revision and addition to DTE factsheet No.3 April 2000 on the ADB.



This IFI factsheet is published by Down to Earth, the International Campaign for Ecological Justice in Indonesia.

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