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Down to Earth IFIs Update

No 26, June 2002

Concern over Internal Governance Raised at ADB Annual Meeting 2002

At this year's Asian Development Bank Annual Meeting in Shanghai, May 10-12, ADB donor countries raised concern over the Bank's inspection mechanism and the serious need for a review of the Bank's current inspection policy. ADB President Chino has been urged to work harder to strengthen accountability at the Bank and internal governance. The ADB's recently completed Inspection Panel report on the Samut Prakarn Wastewater Management Project in Thailand is the first-ever Inspection case to come before the ADB Inspection Function. The report revealed that Bank Management opted to deny problems and policy violations in project implementation. In addition to the findings of the inspection report, the Bank management's defensive and uncooperative attitude in responding to the request for inspection and the Inspection Panel's investigation has appalled members of the ADB Board of Directors, leading to more fundamental questions over the Bank's internal governance and President Chino's leadership.

During the Annual Meeting, the Manila-based NGO FORUM on ADB facilitated a number of meetings between citizens groups, Bank management and Country Delegations. These meetings provided opportunities for citizens organizations to raise their concerns on certain projects or programs funded by the ADB as well as on issues related to Bank policies, such as resettlement, water, and privatization. A Panel discussion on "Lessons Learned from the Samut Prakarn Inspection Case" was organized by the Bank Information Center. The Panelists were representatives from the project affected communities, Thai and international NGOs.

NGOs participating in the Annual Meeting for advocacy purposes felt that this year's Annual Meeting reflected some success in the ongoing advocacy work. Finally, donor governments have shown support for stronger accountability and internal governance of the Bank. Also, ADB Management acknowledged that there were problems in the past and that the Bank needs to improve its operations. Whether this will have any impact at project level remains to be seen.

Annual Meetings are statutory occasions for Governors from ADB member countries to convene and receive reports on ADB administrative, financial, and operational accomplishments from the Bank President. The country representatives also provide guidance and new directions for the ADB. There are 60 Governors in total, most of whom are the Ministers of Finance or Central Bank Governors in member countries. Indonesia is represented by Dr. Boediono (Indonesian Ministry of Finance) as the Governor and Mr. Sjahril Sabirin (Governor of Indonesia's Central Bank) as the Alternate Governor.

The Meetings provide opportunities for member governments to meet with ADB staff, non-governmental organizations (NGOs), media, representatives of observer countries, international organizations, academics and the private sector. Over 3,000 participants attend each Annual Meeting. Two Indonesian NGOs, Walhi West Java and INFID, attended this year's Annual Meeting. Representatives from the Indonesian labor unions under the Asian Labor Network on IFIs (ALNI) were also present.

Nadia Hadad, INFID
Taufan Suranto,Walhi West Java,
Violetta Corral, NGO Forum on ADB,
Nurina Widagdo, Bank Information Center,

NGO FORUM on ADB listserve.
Bank Information Center
ADB website

ADB Inspection Policy Under Review

The Asian Development Bank (ADB) is in the process of reviewing its Inspection Function, the Bank's only accountability mechanism (See DTE Factsheet 22: Mar 2002) This mechanism allows communities adversely affected by ADB-funded projects and programs to seek redress for material harm caused by failure of the ADB to comply with its own policies. The first Inspection case undertaken by the ADB, the Samut Prakarn Wastewater Management Project in Thailand, revealed serious flaws in the Inspection Function. The ADB began a review of the Inspection Function in 1997 but only decided to continue the incomplete process after the problems in the Samut Prakarn Inspection case became apparent.

The ADB has posted the first draft working paper for the Inspection Function Review on its website It has designed the review as a participatory process and has scheduled consultations and workshops on the review. The participants in these consultations and workshops will be representatives from the government, civil society, and private sector from both donor member countries and developing member countries.

The first round of consultations, which will discuss the first working draft, is scheduled to take place in June 2002. The consultations will be held in Tokyo, Manila, Frankfurt, Ottawa, and Washington, DC. The second round will take place in late July to August in Phnom Penh, Kathmandu, Beijing, and Sydney, with the possible addition of Thailand, Sri Lanka, and Pakistan.

In September, the comments from the sub-regional consultations will be integrated into a third draft working paper for ADB interdepartmental comments and ADB Management approval. The presentation of the third draft working paper to the ADB Board of Executive Directors is tentatively scheduled for September 2002. For further updates on the schedule, visit

Civil society groups have been pushing for a stronger mechanism at the ADB to address the grievances of project-affected people. One of the main complaints regarding the current Inspection Function is that the mechanism does not do this. Civil society groups are greatly concerned about a recent push within the ADB for a problem-solving mechanism only. While this is important, a stronger accountability mechanism is also essential. Without this, there will be no tool for holding the Bank accountable for its actions.

(Source: Bank Information Center or contact

Two New Globalization Organizations Established in Indonesia

Two new organizations whose focus will be on globalization issues have been recently established in Indonesia. The first, the Institute for Global Justice (IGJ), based in Jakarta, was officially formed in July 2001. The Institute seeks to facilitate a social transformation whereby communities and the public are able to develop a critical position on globalization. The Institute's day-to-day work is spearheaded by Hira Jhamtani, Bonnie Setiawan, and Nur Hidayat. Six prominent Indonesian NGO figures sit in the Institute's Board: Indah Sukmaningsih, Sukma Violetta, Binny Buchori, Suchjar Effendi, and Bonnie Setiawan. IGJ's main focus is on World Trade Organization (WTO) related issues.

The second organization is called the Indonesian Forum on Globalization (INFOG), based in Solo, Central Java. INFOG's goal is to raise public awareness on globalization and its consequences in Indonesia, particularly on natural resources, local economies, human welfare and its effects on democracy. INFOG endeavors to support global solidarity in order to achieve sustainable development while facilitating local initiatives to challenge globalization. Established in February 8, 2002, INFOG's main focus will be on water and globalization, including the issues of water sector restructuring, water privatization and the roles of multilateral development banks. Nila Adrianie is INFOG's executive director.

Institute for Global Justice (IGJ), website
Indonesian Forum on Globalization (INFOG)

Power Sector Negotiations and Revision of Law Close to Final

State-owned eletricity firm PT PLN is close to finalizing new contract negotiations with all 27 independent power producers (IPPs) in Indonesia. After the economic crisis hit Indonesia in 1997, the Indonesian Government froze the power purchase agreements (PPAs) with these IPPs, leading to an international outcry over the breach of PPAs. The original contracts were signed during the Suharto period and gave favorable terms to the IPPs, which created huge debts for PLN.

The renegotiation of the PPAs is one of the conditions set by the Asian Development Bank in its USD 300 million Power Sector Restructuring Loan to Indonesia. Disbursement of this loan has been stalled for more than a year due to the government's failure to fulfil the loan's conditions.

Another condition for the loan disbursement is the promulgation of a new Electricity Power Law, which is subject to Parliament's approval anytime now. Criticisms have been expressed regarding the vagueness of the Power Bill and the lack of clear language in the Bill on accountability and governance in the restructured power sector. A seminar organized by the Indonesian NGO Working Group on Power Sector Restructuring on May 22, 2002 in Jakarta also raised concerns that the proposed power bill would only give leeway for private power companies to control the sector.

The seminar also marked the launch of the Working Group's new book called "Listrik yang Menyengat Rakyat: Menggugat Peranan Bank-bank Pembangunan Multilateral" (Electricity that Harms People: Questioning the Roles of Multilateral Development Banks).

(Sources: AFX-Asia, February 19, 2002; Sinar Harapan, May 22, 2002; Kompas May 23, 2002. Business Indonesia, May 24, 2002; Various information from The Indonesian NGO Working Group on Power Sector Restructuring)

Contact: Indonesian NGO Working Group on Power Sector Restructuring

Concerns over OPIC's Plan to Finance UNOCAL in Indonesia

Together with other Indonesian and international citizens organizations, Jaringan Advocacy Tambang (JATAM) has raised concerns with the Overseas Private Investment Corporation (OPIC), over its plan to finance West Seno I and II projects in the Makassar Strait, Indonesia. These offshore oil and natural gas projects, which will yield an estimated 145 million barrels of oil, are sponsored by California-based UNOCAL Corporation.

JATAM is a network of non-governmental organizations and community organizations working on human rights, gender issues, the environment, and indigenous people's rights impacted by mining policy and activities in Indonesia. OPIC is a US Government agency providing political risk insurance and loans to U.S. businesses to invest and compete in more than 140 emerging markets and developing nations worldwide.

While OPIC claims that Environmental Impact Assessments of the projects have already been conducted, concerned citizens are not convinced that these have adequately taken into account the environmental, social, and socio-economic impacts of the project and the concerns of the affected communities. UNOCAL does not have a good track record of environmental and social performance in Indonesia. In fact, in other UNOCAL projects in Kutai District, East Kalimantan, severe environmental impacts and human rights violation have taken place. (See DTE 47 November 2000 and DTE 45 May 2000) UNOCAL has yet to show that it follows Indonesia's new environmental regulations that require public consultations, transparency and information availability in the public domain for proposed projects that have potential environmental consequences. JATAM is calling on the government not to approve the projects.

JATAM expressed its concerns to OPIC in letters sent in January and March 2002, and received a brief response from OPIC in late March 2002. OPIC stated it valued information from local communities and would remain engaged with community's organizations throughout the project cycle.

(Source: JATAM mailing list GALI-GALI volume 4, no 22, March 2002)

Contact: and visit JATAM website

Comments on World Bank's Rural Development Strategy Draft Invited

The World Bank has posted its draft Rural Development Strategy on its website Civil society groups monitoring the development of the strategy draft find that it contains several controversial aspects, including the promotion of genetic engineering and pesticides, reliance on the private sector treatment of market-led land reform, and water privatization.

Initially the Bank planned to send the draft strategy to the World Bank Board of Directors for approval on July 9, 2002. International NGOs requested an extension of the commenting period, originally scheduled until May 16, 2002). Comments will still be accepted until July 8, 2002. Consequently the Board approval may also be delayed.

(Source: The Bulletin of What's Up in the International Financial Institutions, Program of Friends of the Earth International, Issue 18, May/June 2002)

JBIC Adopts New Environmental Guidelines

The Japan Bank for International Cooperation (JBIC) adopted a new set of environmental guidelines on April 1, 2002. These long-awaited new guidelines will come into full effect on October 1, 2003. According to a JBIC news release, key elements of the guidelines such as a new checklist, category classification, disclosure of category classification, and disclosure of environmental reviews will hopefully be implemented by October this year.

The strong points in the new guidelines include:

The new guidelines, however, lack two key elements. First, there is no clear compliance mechanism although the guidelines state that JBIC will accept objections regarding non-compliance. Second, many terms are ambiguous and open to interpretation. JBIC's response to this concern has been to say that these issues will be clarified in the form of a "Frequently Asked Questions" (FAQs) document which will be made available on the website by October 2002. Concerns remain regarding the binding power of FAQs.

JBIC, the biggest public financing body in the world, is an official Japanese Government institution that provides various types of funding all over the world. JBIC is a result of a merger in 1999 between the Japan Export Import Bank and Overseas Economic Cooperation Fund. Another Japanese public financing arm, the Japan International Cooperation Agency (JICA), provides grants for project and non-project activities in developing countries. JBIC and JICA are seen as working hand in hand to promote Japan's economic interests in Asia and globally.

(Source: Mekong Watch CATFISH TALES, May 24, 2002. Issue #1.)

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

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