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Down to Earth IFIs Update

No 16, June 2001


NGOs and Indonesian Farmers Monitoring World Bank Agricultural Project Get Result

In the late 1990s, farmers in Sumatera and Kalimantan -- facilitated by the Solo-based Yayasan Duta Awam (YDA) and the US-based Pesticide Action Network North America (PANNA) -- monitored a multi-million dollar World Bank financed project known as the Integrated Swamp Development (ISDP). The ISDP aimed to alleviate poverty on swamp area transmigration sites by improving water control structures, increasing food crop and tree crop production and building or rehabilitating roads and drinking water facilities. Investigations in the field uncovered extensive problems in the project, including the increased use of and dependence on chemical pesticides, unfinished irrigation systems, lack of transparency regarding terms of loan repayment, and widespread corruption.

After three years of participatory monitoring and making recommendations to the Indonesian government (GoI) and World Bank officials, YDA and farmers in the project area achieved concrete improvements in the project. These include training in integrated pest management (IPM) in late 2000, hiring and placement of "community organizers" in the field to respond to farmers' concerns, and elimination of many of the corrupt practices by local agricultural extension workers.

Source: "Taking the World Bank to Task: A Case Study of Successful Community-Based Monitoring in Indonesia" Global Pesticide Campaigner, Vol. 11, No. 1, April 2001, which will be available soon at www.panna.org.

Contact: Nila Adrianie at dutaawam@bumi.net.id or Jessica Hamburger at jah@panna.org.


IMF May Resume Lending to Indonesia

The International Monetary Fund (IMF) is expected to send another team to Jakarta to draft a new Letter of Intent (LoI) with the GoI. A Letter of Intent is basically a set of economic reform programs mandated by the IMF to governments in exchange for loans from the IMF.

Since December 2000, the IMF has frozen its $400-million loan disbursement to Indonesia due to the reluctance of the GoI to follow the recommendations of a three person Independent Panel commissioned by the Fund. The Panel is advising amendments in the Central Bank Law to prevent political meddling in monetary policy. Under the original GoI proposal, the supervisory board could recommend to the House the dismissal of any member of the Board of Governors of the Indonesian Central Bank for failing to perform her or his duties. The Fund is also urging the GoI to publish the Panel's recommendations.

As well as the Central Bank Law amendments the IMF has demanded that the GoI postpone the issuance of US$500 million bonds backed by revenue from gas exports and that it revise the budget to keep the deficit at a reasonable level of around 3.8 percent of GDP. These are three main conditions from the Fund to resume the long-delayed disbursement. It is hoped that the GoI agreement on the three conditions will revive investor confidence in the ailing economy and encourage other multilateral institutions to provide financial support and restructure Indonesia's maturing debt in 2001. A mission from the Fund's Headquarters was deployed to Jakarta in April 2001 to review the fulfillment of conditionalities. However, it has only determined that a further halt of $5 million IMF funds is necessary.

The IMF's failure to solve Indonesia's fiscal and monetary problems through its notorious structural adjustment measures has put its credibility at stake. But the Fund puts the blame on Indonesia, pointing to the domestic political instability that undermines the Fund’s recommended measures. (see also June 2001 Factsheet)

(Source: Dow Jones Newswire, May 21, 2001; Reuters, May 21, 2001; Jakarta Post June 2, 2001; Jakarta Post June 14, 2001)


ADB Environment Policy to Be Drafted and Consulted

After thirty-five years of operations and facing increasingly severe criticism over the adverse environmental impacts of its projects and programs all over Asia and the Pacific, the Asian Development Bank (ADB) has finally decided to draft an Environment Policy.

Civil society groups working on ADB-related issues as well as people affected by ADB-funded projects and programs should take a careful look at drafts of the Environment Policy as well as the consultation process. In the past, ADB policy reviews and developments have not meaningfully integrated inputs from civil society groups nor have they reflected experiences from previous ADB-funded projects and programs. In addition, the Bank's poor record in implementing its own policies is well known. (See also DTE Factsheet no. 12, May 2001)

Information regarding the draft Environment Policy Working Paper, Synthesis of the Comments already received by the ADB on the draft Policy, as well as the Consultation Strategy are available at www.adb.org/Environment/Envpol/public.asp or contact environment@adb.org. The public consultation in Indonesia was held on June 12, 2001 in Jakarta. The ADB has appointed Elly Rasdiani rasdiani@rad.net.id and Amanda Akniode akniode@rad.net.id as consultants for the consultation.

Source: ADB website www.adb.org


First ADB Inspection Request Filed

The only way that the ADB can be held accountable for the adverse impacts of its operations is its own accountability mechanism, the Inspection Function. Through this process, affected communities can file a request for an Inspection to the ADB Inspection Committee to investigate whether the project complies with the Bank’s own policies. The Bank Inspection Policy has been in effect since October 1996 but, until now, has never been tested. (For information, visit www.adb.org/Inspection/default.asp) In April 2001 communities affected by the ADB-funded Samut Prakarn Wastewater Management Project in Thailand filed an Inspection Request with the Inspection Committee (for information about the project and the Inspection Request, visit www.bicusa.org). The Samut Prakarn case will put the effectiveness of the mechanism to the test.

Indonesian civil society groups may request that the ADB translate the Inspection Policy into Bahasa Indonesia and hold an Inspection workshop in Indonesia. This may provide an opportunity to learn more about possible advocacy tools for ADB-affected communities and groups with which they can voice their concerns. Contact Ms. Jill Drilon, the Inspection Committee Secretary at jdrilon@worldbank.org.

Source: www.bicusa.org, http://www.adb.org/Inspection/default.asp


ADB Projects and Programs in the Pipeline

The following is a listing of ADB proposed projects and programs for Indonesia related to ecology and natural resources, which are in the preparatory stage. Some are in the form of technical assistance (TA) grants which will be used to prepare projects. Others are loans for actual project implementation.

The list below is intended to serve as an early warning for possible adverse social, environmental, and economic impacts so that civil society groups and potentially affected communities can raise their concerns as early as possible in the project/program cycle.

More information on these proposed loans can be found at http://www.adb.org/Business/Opportunities/prpprjcs.asp and click "Indonesia", or contact

ADB Indonesia Resident Mission
Gedung BRI II, 7th Floor
Jl. Jend. Sudirman Kav. 44-46
Jakarta 10210, Indonesia
Tel. (62-21) 251-2721
Fax. (62-21) 251-2749
Email: adbirm@adb.org


ENERGY

Gas Sector Development Plan:
The Technical Assistance will: (i) develop a strategy for enhancing private sector partnership in gas sector development in Indonesia; (ii) review the terms and conditions of exploration and production contracts and suggest modifications; (iii) develop a Gas Master Plan; and (iv) support institutional capacity building for the technical regulation of the oil and gas sector.
Potential issues:
Impacts on the existing state-owned company workers due to privatization; consumers' interests in gas charges and services; environmental impacts of gas exploitation; transparent and accountable revenue sharing between the private sector and the GoI.


SOCIAL INFRASTRUCTURE

Reform of Water Enterprises:
The proposed Technical Assistance (TA) for the local government water company (PDAM) Restructuring and Rehabilitation will support the third phase of the GoI's water supply and sanitation sector policy aimed at achieving full commercialization and privatization of water supply. The TA will help GoI to position itself as the regulator and administrator of the urban water supply and sanitation sector. The GoI's role will be to enable PDAMs to provide comprehensive water, sewerage, and sanitation services on a commercial basis.
Potential issues:
Impacts to the existing state-owned water company's workers due to privatization; consumers' interests in water charges and services; assurance of access to water for the poor and disadvantaged groups; environmental impacts of water exploitation; transparent and accountable revenue sharing between the private sector and the GoI.

Water Supply and Sanitation Sector:
The TA will have two components: (i) consulting services, and (ii) research and analysis. TA funds will be used to engage a long-term consultant for a period of 36 months. The consultant will ensure continuity in advisory services and facilitate exchange of experience and lessons learned between the GoI agencies, academic and other institutions, and provinces and districts with particular emphasis on the Project provinces. The second component of the TA will consist of resources to be allocated by the Ministry of Health in consultation with ADB for surveys, workshops, operations research and studies in support of health sector reforms.
Potential issues:
Potential lead to user-fee schemes that may not necessarily be favorable for poor and disadvantaged groups.

Rural Water Supply and Sanitation Sector:
The Project Preparation Technical Assistance (PPTA) will assist the GoI to develop and implement a water supply and sanitation delivery mechanism that will enable small communities in rural and peri-urban areas to develop, operate, and maintain water and sanitation systems appropriate to their needs. The TA will also identify and prepare a community-based water supply and sanitation sector project.
Potential issues:
Availability of continued funds to ensure the mechanism's effectiveness; community participation in the design and implementation; potential competition with larger water companies in getting water sources.

Urban Poverty Reduction Sector:
The Technical Assistance will assist the GoI to identify and prepare a sector project for districts to establish urban poverty reduction systems and programs, in partnership with central Government, civil society and the private sector. The TA will target poor and "at risk" households in about 30 large and medium-sized urban centers throughout the southern areas of Central Java and West Java, and the whole of Sumatra. The GoI prefers these areas, they have high urban poverty allocation indices and large numbers of urban poor, and ADB already supports projects in these areas.
Potential issues:
Previous poverty reduction schemes have not proven to be sustainable and effective in reducing poverty; financial irregularities and lack of inter-agency co-ordination have weakened the potential benefits of similar programs in the past.


OTHERS

Development of Leading Indicators of Poverty for Poverty Monitoring:
The technical assistance will help the Central Bureau of Statistics (BPS) develop leading indicators of poverty from existing sources; develop the capacity of BPS to produce and routinely report on these leading indicators to GoI and other poverty stakeholders; train policy makers in the use of these leading indicators; and pilot test collection of potential new leading indicators of poverty and well being.



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

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