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Indonesia and the IMF signed the fourth Letter of Intent in December 2001, which will lead to the disbursement of a USD 400 million loan, part of the USD 4.8 billion bail-out package. The IMF Board of Directors is scheduled to meet in late January to approve the USD 400 million disbursement. This new LoI has 53 conditionalities, compared to 35 in the previous one. Key targets under the fourth LoI:
(Sources: Reuters, December 13, 2001; AFX-Asia, December 14, 2001; The Jakarta Post, December 15, 2001; INFID's Short News Overview No. 72: 14-20 December 2001 http://infid.ngonet.be/sno72-011220.html)
IMF Review Scheduled for February 2002
Meanwhile, the fifth IMF review is scheduled for February 2002 with the visit of a high-level mission to Jakarta. This team is likely to focus on efforts to sell PT Bank Central Asia (BCA), which the government has taken over from the Salim Group. The Bank's sale (scheduled for 2000) was delayed due to allegations that companies who were illegally fronting for the Salim Group were among investors bidding for the Bank. The IMF also told the Indonesian government in January 2002 to delay a controversial decision to ease repayment terms on the huge debts owed to the state by former bank owners, pending a review by the Fund.
(Source: Jakarta Post, January 12, 2002; Dow Jones Newswires, January 14, 2002)
USD 400 Million ADB Loan for Corporate Governance Approved
The Asian Development Bank approved on December 4, 2001 a USD 400 million loan tied to corporate governance reforms. The first tranche of the loan, USD 150 million, was disbursed after the approval. The remaining USD 250 million disbursement is subject to the fulfilment of a set of conditionalities, including (a) concerned state firms' accounting practices or the selection of their board of commissioners and (b) the increased number of privatized state-owned firms.
The Indonesian government needs the loan to finance this year's state budget, which could reach about USD 5.2 billion, 36% of which will have to come from foreign loans.
(Source: Jakarta Post, December 11, 2001)
ADB Grants USD 3.6 Million for State-Owned Enterprises Reform
In a related development, the Asian Development Bank will provide USD 3.6 million for technical assistance to help Indonesia implement a program to reform state-owned enterprises (SOEs). USD 1 million of the grant will be used to review state enterprises' non-commercial operations in order to help them prepare for privatisation. The remaining USD 2.6 million will be used for strengthening SOEs' corporate governance and encouraging transparency in how SOEs will deal with their employees in restructuring or liquidation processes.
The Bank will introduce performance incentive schemes in 30 SOEs, restructuring schemes in 10 SOEs, and privatization schemes in 5 SOEs. The Bank will also train 120 government officials and SOE managers.
(Source: Laksamana.Net, December 13, 2001)
Protests Against Fuel and Electricity Price Increase Erupt in Large Indonesian Cities
Major protests were launched by various groups calling for the cancellation of the Indonesian government's plan to raise the prices of fuel and electricity by approximately 25%. The Indonesian government has heavily subsidied these two commodities, putting a huge burden on the state budget. In 2001, the Government spent about USD 5.2 billion on the subsidy, a heavy burden for the already-tight state budget. With the increase, the subsidy will go down to USD 2.95 billion.
The Indonesian Government has been pressured by the IMF, World Bank, and the Asian Development Bank to reduce fuel and power subsidies in order to keep a more balanced budget. To date, the increase has been much less than required by these institutions, as the government is well aware of the opposition and the fragile political situation, which could lead to further social and political turmoil.
(Source: AFP, January 15, 2002)
USD 200 Million World Bank Loan for Road Improvement in Eastern Indonesia
In December 2001, the World Bank approved a USD 200 million loan under The Eastern Indonesia Region Transport Project (EIRTP). The loan will finance periodic maintenance of 1000 kilometres of national and strategic roads, improvement of an additional 1250 kilometres, and replacement of about 5800 metres of bridges in the poorest and least populated parts of Indonesia in Kalimantan, Sulawesi, Bali, Nusa Tenggara, Maluku, and West Papua. The loan will also support and facilitate the decentralization of planning and management responsibilities for works on all primary roads to local institutions in 15 provinces.
(Source: The World Bank News Release, December 11, 2001)
Japanese Aid Agency Provides Grant for Mineral Exploration
The Japan International Cooperation Agency (JICA) is providing a grant to the Indonesian Ministry of Energy and Mineral Resources to conduct a geological survey to explore and assess mineral potential in East Java, covering an area of 19,000 square kilometres. The survey will be carried out by means of compilation and evaluation of the existing data; interpretation of satellite images; geological, geochemical, and ground geophysical surveys; and drilling in the survey area. The survey will take place for three years, starting in late 2001. A Japanese consulting company, Nikko Exploration & Development Co. Ltd won the contract.
JICA is responsible for the technical cooperation aspect of Japan's ODA programs. It provides grants for various activities, including project preparation that may lead to much larger financing in the form of loans from either the Japanese financial and development agencies as well as the multilateral development organisations.
(Source: JICA Indonesia website http://www.jica.or.id/mineral.html)
ADB New Organization Takes Effect on January 1, 2002
After taking more than a year to design a new structure, the ADB finally announced that its reorganization became effective at the beginning of the year. The old organization has been criticised for slowness in responding to new challenges, lack of clarity on where accountability was supposed to lie within the structure, and a lack of opportunities for staff career development. ADB President Tadao Chino claimed that the new structure would improve the Bank's own work environment, raise its output, and enhance the efficient and effective management of its knowledge and information resources.
Among the changes in the new structure that are important for civil society groups working on the Bank's social and environment performance is the reorganization of the old Office of Environment and Social Development (OESD) into the Regional and Sustainable Development Department (RSDD). RSDD comprises four divisions and one centre. They are:
ADB Projects/Programs in the Pipeline
The following are brief lists of projects and programs that are being prepared for financing by the ADB for Indonesia. Civil society groups are encouraged to take a close look at these proposed projects and programs to ensure that adequate preparations are made so adverse impacts can be mitigated, improvements can be done and, if necessary, postponement can take place prior to approval.
To find more information, go to www.adb.org, click "ADBBO" on the right box, and choose "proposed projects" and then "Indonesia".
ASIAN DEVELOPMENT BANK
| Project/Program Title | Type of Financing | Total Financing (USD million) | Environmental Category |
| Agriculture & Natural Resources | |||
| Rural Micro-Finance | PPTA | 1.00 | Required |
| Social Infrastructure | |||
| Capacity-Building of MSRI Inspectorate General in Combating Corruption | AOTA | 0.625 | [No info] |
| Empowering Poor Communities to Improve Basic Education | GRANT | 3.10 | Not required |
| Water Supply & Sanitation Sector | LOAN | 0.10 | B |
| Rural Water Supply & Sanitation Sector | PPTA | 0.80 million | Required |
| Slum Upgrading and Shelter Delivery for the Urban Poor | PPTA | 1.00 | Not required |
| Finance | |||
| Implementation of Financial Sector Supervisory Institution | AOTA | 1.50 | [No info] |
| Strengthening Business Development Services for Small & Medium Enterprises | AOTA | 1.50 | [No info] |
| Others | |||
| Development of an Anti-Money Laundering Regime | AOTA | 1.50 | [No info] |
| Improving SMEs Environmental performance through Cleaner Production | AOTA | 0.50 | [No info] |
| Local Economic Development and Service Provision | AOTA | 0.50 | [No info] |
| Poor Farmer Income Improvement | LOAN | 50.00 | B |
Note:
PPTA = Project Preparation Technical Assistance (non-loan financing)
AOTA = Advisory Technical Assistance (non-loan financing)
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