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Down to Earth IFIs Update

No. 11, December 2000 / January 2001

IMF withholds funds again

Rizal Ramli, Indonesia's co-ordinating minister for the economy, confirmed in December that the International Monetary Fund (IMF) had delayed the next loan disbursement. US$400m had been scheduled for release that month. The IMF, which has so far forwarded in excess of US$8 billion during the last three years to Indonesia, downplayed any potential negative impact of the news but gave no reason for the delay.

Ramli also sought to play down the IMF rift, describing it as technical and due to the holiday season. He also has pointed out that Indonesia did not need the money urgently because of recent growth in its foreign reserves, which stood at almost US$30bn. (See November's DTE IFI Factsheet at

Friction between the IMF and Indonesia has been exacerbated in the last month by the government's plan to amend the central bank law, decentralisation, lack of transparency in corporate debt workouts and the postponed sale of two major banks.

The IMF earlier fired a warning shot across the Indonesian government's bow in a tersely worded letter dated November 8. Anoop Singh, the Fund's Washington-based deputy director for Asia and the Pacific, demanded that Jakarta move decisively to minimise risks in its fiscal decentralisation plan, use higher oil revenues to repay government debt and set a firm timetable for asset sales. Failure to do so by early December, the letter suggested, would stop the IMF's board from approving fresh loans to the country.

The IMF has been particularly worried about the lack of preparation in plans to decentralise political and economic decision-making by giving local governments authority to tax and spend in their districts, a process that could easily throw central government finances off-balance. The IMF wants Jakarta to prohibit local governments from borrowing independently from abroad and from borrowing independently at all through 2001.

Indonesian President Abdurrahman Wahid criticised the IMF for helping his political opponents by delaying the next loan disbursement and said the Washington-based fund needed to have more consideration for his political position. "Things that we cannot swallow, we will not swallow… the IMF must learn the art of compromise ... The IMF must understand me." he said. Wahid dismissed the suggestion that the IMF might cut off the funds entirely. "Up to now they have delivered the money to us," he said. It seems that GOI is taking for granted that the IMF is going to disburse the loan.

This is likely to annoy to the international community, already unhappy about the highest legislative official, Assembly Speaker Amien Rais's threat to nationalise American companies on the eve of a visit by some 40 of the world's largest pension funds and money managers.

The IMF review team will arrive in January and a new LoI is expected. The tranche could then be released between February and March 2001.

(Sources: Dow Jones Newswires December 19, 2000; Asian Wall Street Journal December 18, 2000; AFP December 17; Business Times, 16 December 2000; The Straits Times, December 16, 2000)

In brief

Washington's Political Transition Threatens Bretton Woods Twins

The coming to power of the Republicans in the USA may spell trouble for the International Monetary Fund and the World Bank. The Bretton Woods institutions will likely lose their liberal internationalist protectors like Treasury Secretary Larry Summers who believe in using the Fund and Bank as central instruments to achieve US foreign economic policy objectives. Coming in with President-elect George W. Bush will be a set of conservative analysts and technocrats representing the thinking of the US Congress' Advisory Commission on International Financial Institutions. Also known as the "Meltzer Commission," after its chairman, banker Alan Meltzer, the body issued earlier this year a report condemning the IMF for promoting global macroeconomic instability and portraying the World Bank as irrelevant to the mission of promoting development and reducing global poverty. Confronted with four years of Republican hegemony, James Wolfensohn, president of the World Bank, is rumoured to be contemplating resigning before the end of his second term in office.

The full version of this article is written by Walden Bello of Focus on the Global South and is available at

Indigenous policy dilution threat

The World Bank's revised Indigenous Peoples Policy will be released in draft early in 2001 for further consultations. Tom Griffiths of the Forest Peoples' Programme (FPP) comments: "we are concerned that crucial safeguards relating to land and customary resource rights should be strengthened in the new policy. The indigenous movement and its supporters will have to campaign hard to make sure the new policy is not weaker than the existing one".

The Bank's 1991 Indigenous Peoples Policy (IPP) aims to ensure that Bank staff, borrower governments and implementing agencies respect indigenous rights. Civil society organizations fear that a revised policy may emphasise participation and benefit sharing, but sidestep land rights and self-determination issues. The Bank started the revision of its IPP in 1998 as part of its general drive to simplify and streamline its policies. Indigenous peoples demanded that any revised policy must be stronger than the existing directive and asked that the Bank conduct a thorough review of the difficulties with policy implementation. As the latter did not materialise, FPP and Bank Information Center organised a workshop in May to discuss ten case studies. Prepared by indigenous peoples from Latin America, Africa and Asia, the studies examined Bank-assisted operations affecting their communities and territories. No Indonesian case studies were presented. Southeast Asia was represented by the Bataan project in the Philippines (Aetas people).

Evidence presented at the workshop showed that compliance on the IPP is often weak and sometimes highly unsatisfactory, especially with regard to indigenous people's land rights. There was only one case where indigenous peoples felt they had participated in a meaningful way during the project preparation phase. Indigenous peoples still often find themselves worse off after Bank projects due to repeated patterns of superficial or absent baseline studies and oversights in appraisal and supervision. The case studies also exposed the structural and financial obstacles to effective implementation. Bank staff lack the time, resources and incentives to adhere properly to safeguard policies. Major reforms to staff incentives and budgets will be needed for more effective compliance. Workshop participants also called for:

The summary report, individual case studies and other briefings on the Indigenous Peoples and Forests policies are available from:

This article is from Bretton Woods Update. See

New 'Net the debt' site

The One World website has launched, a global portal site on international debt. The site, edited from Zambia, is a partnership of over 70 aid agencies, human rights and campaign groups worldwide. It contains latest news, campaign actions, online discussions, events, a directory of links and more. "The internet can help bring together global civil society to ensure that debt does not bring more human suffering and poverty," says Joe Chilaizya, editor.


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

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