Down to Earth IFIs Update

The Consultative Group on Indonesia (CGI) met for two days in April in Jakarta. 140 representatives from the CGI's 22 member nations plus multilateral lenders, including the World Bank and the IMF, took part in the talks behind closed doors. Protestors tried to block the venue and some of the Indonesian delegates were forced to climb over the fence into the finance ministry.

The meeting came in the wake of the World Bank’s decision in March to axe the notorious social safety net loan.

Key issues discussed at the CGI were the continued suspension of IMF funds, forestry policy, poverty reduction and decentralisation. The present government of Indonesia (GoI) was hoping that the week of meetings with visiting IMF officials from Washington would see the IMF loan approved and signal a turning point in the country's political and social problems. The decision not to resume funding made it appear as if the IMF and donor community are waiting for a change of government. This followed the down-grading by the IMF of a high level Indonesian delegation to IMF HQ in Washington. Originally intended to include the central bank governor and chief economic minister, the meeting was reduced to senior Bank Indonesia staff only.

The main contentious issue was the ballooning budget deficit. Half of the budget is used for debt servicing and this could rise from US$5.4 bn to US$7.6 bn next year. As bank recapitalisation bonds start to mature, the Rupiah sinks and interest rates rise, many analysts see a debt default or capital controls as inevitable. Trading in the Rupiah is already heavily restricted.

The IMF wishes to see large reductions in fuel subsidies and other areas. A report by the United Nations Children's Fund (UNICEF) raised concerns over cuts as the government's health budget has shrunk by 20 per cent while the education budget has fallen by 40 per cent since 1998. Protestors waved placards reading: "Soft loans no, debt relief yes" and "We pay more than we receive." Other posters waved by the demonstrators called for the saving of Indonesia's forests -- a reference to the CGI's insistence at its last annual meeting that Jakarta should work to combat rampant deforestation.

On forestry, Minister of Forestry Marzuki Usman opened by stating that "No forest means no future." He admitted that progress in addressing forest problems since the last CGI has fallen far short of the objectives set by the government. Co-ordinating Minister Ramli reported on initiatives of the Interdepartmental Committee on Forestry (IDCF), which he chairs. The IDCF focuses on the four priorities the Government considers most pressing: illegal logging, debt restructuring of wood-processing firms, forest fires, and the national forest inventory. It has called for stricter penalties for forest law violations and implementation of standards to guide Bupatis (district heads) in managing forests under decentralisation. The IDCF has achieved very little since it was set up last year - environmental NGO WALHI has withdrawn from the group considering it a waste of time. Frantic scrambling for something it could present as an achievement to the CGI focussed on a law, passed in March, banning the export of ramin – a valuable tropical hardwood, but by no means a major export.

All donors supporting conservation projects in national parks reported that failure of local law enforcement was allowing rampant illegal logging. Several donors reported that decisions on the future amounts of development aid available for Indonesian forestry depended very much on tangible results in the next few months. (See also DTE 49.)

The CGI next meets in October/November. The GoI has invited participant to Yogyakarta.

Source: World Bank Press Release, May 8, 2001; The Jakarta Post, May 8, 2001.

See CGI Website from http://www.worldbank.or.id

Most ADB projects in Indonesia of no benefit to the country

In a new report, the NGO Environmental Defense came to the shocking conclusion that at least 70% of Indonesia's ADB projects are not likely to produce lasting economic or social benefits for the country, despite the huge cost of loans.

For further details see this month’s Factsheet or contact Stephanie Fried at Environmental Defense.
E-mail. indo_mdb@environmentaldefense.org or Stephanie_Fried@environmentaldefense.org

Leaked documents show World Bank worried about its fossil fuel investments

The World Bank Group, which has invested some US$ 2 billion annually in oil, gas and mining and other non-renewable energy projects in developing countries over the past decade, is increasingly concerned about the public relations and environmental risks created by these projects, according to recently leaked documents.

One document, part of a recent presentation to staff at the Bank's private sector arm, the International Finance Corporation (IFC), labels the oil, gas and mining sector a "clear and present danger" to the agency's work due to "global concern over (the) inherent sustainability of extractive industries."

It refers to the risk posed by non-renewable power projects, such as coal-fired power plants, given "compelling evidence of accelerating global warming [and the] anticipated international clamor for action on GHGs," or greenhouse gases. In both cases, the document suggested that the IFC should do more to address these concerns, although it did not make specific recommendations as to how to do so.

The document appeared to be part of an ongoing review by the IFC and the Bank on extractive industries. The review's first stage will be concluded with the release of a "formal paper" in several weeks, according to an IFC spokesman. Since the Climate Convention - the first international instrument to address global warming - was signed in 1992, the World Bank Group has invested some US$15.7 billion in oil, gas, coal and fossil fuel-power projects around the world. At the same time, the Bank has invested only $1 billion in renewable energy and energy efficiency.

Source: Inter Press Service, May 3, 2001.

Further information on World Bank and ADB power sector projects are available at

World Bank http://www.worldbank.or.id
ADB http://www.adb.org/Indonesia/default.asp

On-line resources on the World Bank-IMF Spring Meetings

This year's joint meetings of the World Bank Development Committee and the IMF's International Financial and Monetary Committee took place on April 26-30. To see the documents, visit the Spring Meetings 2001 official website at http://www.worldbank.org/springmeetings/ and the Development Committee website at http://wbln0018.worldbank.org/dcs/devcom.nsf.

New access to World Bank information and resources on development

The new Askus@worldbank.org service, on-line at http://www1.worldbank.org/prem/askus.htm, can help find answers to questions on development topics by connecting enquirers to World Bank help desks and advisory services. Newest among the Bank's advisory services is the Rapid Response web site, http://rru.worldbank.org/, which provides access to knowledge resources on investment climate and privatisation policy issues through a collection of papers, a discussion board and a helpdesk.