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Down to Earth IFIs Update

No 28, September 2002

Kotopanjang Court Case to Begin September 5 in Tokyo District Court

The court case over the Japanese ODA-funded Kotopanjang Hydropower Project began on September 5 in the Tokyo District Court. This marks the first time the Japanese ODA has been legally challenged by people adversely affected by projects it has funded. A total of 3,861 affected villagers filed a suit seeking USD 165 million in compensation for losses caused by the dam project. The compensation, however, is not the main issue for the affected people. They would like Japan to take measures to help them regain the standard of living they had before they had to resettle. The suit names as defendants Tokyo Electric Power Services, the Japan International Cooperation Agency (JICA), the Japan Bank for International Cooperation (JBIC), and the Japanese Government.

Fumio Asano, a Japanese lawyer representing the affected community, said that local residents have not received adequate compensation for the damage. The plaintiffs claim that as many as 23,000 people were forcibly resettled or partially lost their property due to the dam construction. The head of the support group, Kazou Sumi, a Professor of Law at Niigata National University, said that the case highlights the harm done to local people by Japanese-funded projects that simply export public works projects, benefiting Japanese politicians, construction firms, and bureaucrats, and officials of the nations receiving the help. No significant response has been made by the defendants except that they promised to study the claim carefully and consider their response.

(Source: The Yomiuri Shimbun, September 1, 2002; Agence France-Presse, September 4, 2002; Reuters, September 5, 2002)

Japan Introduces a New Loan Scheme

Japan introduced introduced a new loan scheme called "Special Term for Economic Partnership (STEP)" in July 2002. According to the Japan Bank for International Cooperation (JBIC), this new scheme is expected to raise the visibility of Japan's ODA to the citizens of recipient countries and in Japan by utilizing and transferring the technology and know-how of Japanese firms. STEP is intended for low-income, lower-middle-income, and middle-income countries.

Projects that can access STEP are mostly infrastructure-based, such as bridges and tunnels, ports, airports, urban mass transit systems, oil/gas transmission and storage facilities, urban flood control, communications/broadcasting/public information systems, power stations/power transmission and distribution lines, roads, dams and environmental projects (air and water pollution prevention, waste treatment, and recycling).

STEP is designed to help Japanese firms doing development business abroad. It is tied aid, i.e. Japanese technologies and equipment must be substantially utilized in the projects funded by STEP. Procurement conditions include the condition that prime contractors are tied to Japanese firms and that joint ventures with recipient countries are admitted only on the condition that Japan is a leading partner. The total cost of goods procured from Japan should not be less than 30% of the total amount of contracts financed by the STEP loan.

JBIC claims that interest rates will be set so as to make it possible to extend tied aid under OECD rules. In addition, procurement shall be audited by a third party after a bid process is completed by utilizing an ODA loan or JBIC Special Assistance Facility.

(Source: JBIC website

ADB New Education Policy Approved

The ADB Board of Directors has approved a new Education Policy, which is aimed at providing all children and adults in the Asia-Pacific region with equitable access to an education that will empower them to break out of the poverty cycle and participate effectively in national development. The ADB's earlier education sector policy paper of 1988 emphasized the importance of investing in primary and secondary education in the broad context of human and social development.

The new policy paper emphasizes more support for innovative and responsive programs in literacy and non-formal education and expansion of early childhood development programs with an emphasis on low-cost, community-based provision. The paper also prioritizes basic education that ensures equitable access and resource allocation, improving quality and strengthening community development. Secondary education investments will emphasize cost-sharing, private sector provision, and special programs to increase access by the poor and women. Higher education projects will enhance the role of the private sector and strengthen government basic capacity to monitor education standards and to support NGO-led provision of skill training in income generating activities for poor women.

It is not yet known if an independent critical analysis of this policy— analyzing in particular the rationale for and impacts of privatizing basic services, including education, and shifting the responsibilities of governments from service providers to standard and quality assurors — has been carried out.

Based on the policy, the ADB will prepare education sector strategies and 'roadmaps' for each country to translate policy principles into specific strategies and investment plans.


Corruption and Decentralization the Biggest Challenges for World Bank in Indonesia

The World Bank's outgoing Country Director for Indonesia, Mark Baird, said in his farewell remarks at the Jakarta Foreign Correspondents Club in August 2002 that despite some improvements that Indonesia has made in the four years since it was hit by the Asia economic crisis, five key terms should be on the Government's agenda in the coming year:

  1. Improve tax and customs administration in order to raise revenues to finance the budget.
  2. Develop balanced labour market policies so that both labour's and investors' interests are protected. Mr. Baird referred to recent sharp increases in minimum wages, generous severance packages for workers, and growing labour disputes that may discourage investors from operating in Indonesia.
  3. Avoid the excesses of decentralization that may lead to breakdown in public services and create added uncertainties and risks for private investors. The Central Government needs to step in and nullify illegal rulings by local governments and local policies that are in conflict with national policies.
  4. Push ahead with Indonesian Bank Restructuring Agency (IBRA) asset sales and privatization to finance the budget deficit and to put productive assets back into the hands of the private sector.
  5. Improve the regulatory framework for investment, particularly in infrastructure sectors.
Mr. Baird also assessed where the Bank fits in Indonesia's big picture and what the country needs to do in the future. He said that corruption has been and will continue to be the biggest challenge for the Bank. He singled out the lucrative forestry industry as particularly corrupt and where progress to combat corruption was dismally slow. He further said that the World Bank no longer took part in forestry projects in Indonesia because the military, the policy, and local governments have such extensive financial interests in them. He stated that the Bank has concentrated on working with the Government to implement better procurement and financial management systems. The Bank's Institutional Integrity Department in Washington, DC has investigated corruption complaints. This includes a corruption allegation over the Sulawesi Urban Development Project.

The second challenge for the Bank's program is decentralization. While it will be a challenge for the Bank to work with more than 350 local governments, this work holds the key to the solution of problems in the current system by channelling the Bank's money to reform-minded local officials for good economic policies, proper use of public funds, and commitments in poverty reduction.

In past two years the Bank has only provided financing of USD 310 million per annum on average – less than a quarter of the levels of the previous decade. Mr. Baird said that it is the Government that has to decide how much more it wants to borrow, taking into account debt levels, the cost of funds from alternative sources, and the need to maintain basic expenditure on social services and anti-poverty programs. The Bank could provide higher financial support if there were more rapid progress on improving public resource management and developing a new poverty reduction strategy.

Mr. Baird is leaving the Bank in September 2002 to return to New Zealand. His replacement is Mr. Andrew Steer, who is from Britain and was the Bank's Country Director for Vietnam since 1997. He is an economist by training. He was based at the World Bank's resident mission in Indonesia from 1980-1983 then worked on economic reform issues in Thailand and Bangladesh. He was chief of the World Bank's Country Risk Division and Senior Advisor in the Economic Research Department. Subsequently he was appointed Director and principal author of the World Bank's annual World Development Report (1992), "Development and the Environment", which was the Bank's primary input to the Rio Earth Summit. He was named Director of the Environment Department shortly thereafter.

Farewell Remarks by Mark Baird, World Bank Country Director for Indonesia, at the Jakarta Foreign Correspondents Club, August 27, 2002.
World Bank press release, September 6, 2002. )

World Bank /IMF Annual Meeting 2002: background information and calendar of events

The Board of Governors of the International Monetary Fund (Fund) and the Board of Governors of the World Bank Group (Bank) will meet this year on September 29, 2002 in Washington, DC to discuss the work of their respective institutions. The Annual Meetings, which generally take place in September-October, have customarily been held in Washington for two consecutive years and in another member country every third year.

In recent years, the Annual Meetings have been preceded by meetings of the International Monetary and Financial Committee, the Development Committee, the Group of Ten, the Group of Twenty-Four, and various other groups of members. At the conclusion of their meetings, the International Monetary and Financial Committee and the Development Committee, as well as several other groups, issue communiqués. Normally, the Annual Meetings include 2 days of plenary sessions, during which Governors take up matters of business, consult with one another, and present to the assembled their countries' views on current issues in international economics and finance. This year, due to security concerns, the Annual Meeting will only take place for one day.

At the Annual Meetings, the Boards of Governors make decisions on how current international monetary issues should be addressed and approve corresponding resolutions. The Annual Meetings are chaired by a Governor of the Bank and the Fund, with the chairmanship rotating among the membership each year. Each year any new members are welcomed into the Bank and Fund.

Because the Annual Meetings bring such a large number of member country officials together, they provide opportunities for consultations large and small, formal and informal. Numerous seminars are held in conjunction with the meetings, including seminars conducted by staff members for members of the press. The Annual Meetings Program of Seminars(the ticket costs USD 700 for each participant) is designed to foster creative dialogue among the private sector, government delegates and senior Bank and Fund officials.

Civil society organizations, coming from all over the world, have also taken advantage of the Annual Meetings to hold consultations with country delegations and Bank officials. A number of parallel events are also organized on various issues around development and globalization.

The following lists events organized by civil society groups as well as the Bank/Fund's events surrounding this year's Annual Meeting. Details of time and venue can be found at the Bank Information Center's website and the World Bank Group and IMF websites.

Items marked * are for official events which are only for government delegations, ** events with advance payment requirements (USD 400 for NGOs), and *** events organized by the IMF or World Bank Group that require NGOs to obtain advanced accreditation and registration. The rest are open for public for free.

5 - 25
Global Justice Film Festival (daily, in the afternoon). Films include "Global Village or Global Pillage", "Two Trevors Go to Washington", "Another World is Possible: North American Voices at the World Social Forum".
September 23 International Finance Corporation Sustainable and Safeguard Policies. Discussion with Joseph O'Keefe, Manager of Corporate Relations at the IFC, and Deborah Feigenbaum, IFC Corporate Relation. ***

Discussion on Implementation of World Bank Group Safeguard Policies ***

September 24 International Finance Corporation Extractive Industries Review. NGO Discussion with IFC Director of Oil, Gas, and Chemicals Department Rashad Kaldany ***

World Bank and Interaction Meeting on LICUS Initiative ***

International Finance Corporation Baku-Tbilisi-Ceyhan Pipeline Project in Azerbaijan, Georgia, and Turkey. NGO Discussion with Dimitris Tsitsiragos, IFC. ***

September 25 Democratizing Development: Social Accountability through PRSPs. World Vision and the World Bank are co-hosting a one-day conference to promote debate on the role that Poverty Reduction Strategy Papers can play in fostering greater social accountability.***

International Finance Corporation Yanacocha, Cerro Quillish, and Quellaveco mining projects in Peru. NGO discussion with Deema Fakhoury and Chris Goss, IFC. ***

International Finance Corporation Chad-Cameroon Pipeline Project. NGO Discussion with Shahbaz Mavaddat, IFC. ***

World Economic Outlook press conference by Kenneth Rogoff, Counsellor and Director, Research Department, IMF (for press).

September 25 - 27 End Corporate Rule: Global Struggles against the IMF & World Bank – Conference Teach-In.
September 26 World Development Report (WDR) 2004: Making Services Work for Poor People. Discussion organized by the World Bank and InterAction. ***

Press Conference by IMF Managing Director Horst Koehler (for press).

Press Conference by World Bank President James Wolfensohn (for press).

NGO Meeting with the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) Compliance Advisor and Ombudsman Office (CAO).***

Panel Discussion on Debt Arbitration Mechanism. Participants include the IMF, a Private Sector Representative, a Southern Parliament, and civil society.

International Finance Corporation Open Question and Answer with Peter Woicke, IFC Executive President. ***

Jubilee Interfaith Prayer Service, followed by a candlelight procession and all-night vigil at the US Treasury Department.

September 27 G-24 Meeting *

G-24 Ministerial press conference (for press).

World Bank Program of Seminars **

  • Country Briefing I: Philippines
  • Country Briefing II: Tanzania
  • Regional Briefing IV: Middle East and North Africa
  • Regional Briefing V: Africa Investment Climate
  • Keystone Roundtable "From Trade Round to Development Agenda"
  • Sovereign Debt Restructuring Mechanism (SDRM) – Key Features and Design Issues
  • Public-Private Partnerships and Sustainable Development
  • Anti-Money Laundering – Toward a New Global Standards
  • Finance for Growth: Making it Happen
  • Standards and Transparency
  • Getting Development Results: Aid Effectiveness and Education for All
  • Capstone Roundtable: Honoring a Global Compact for Growth and Development
  • Evening Reception
NGO Roundtable on World Bank Energy Policy
September 28 International Monetary and Financial Committee *

Press conference by UK Chancellor of the Exchequer Gordon Brown, Chairman of the International Monetary and Financial Committee, and IMF Managing Director Koehler (for press).

Development Committee *

Press conference by South African Minister of Finance Travor Manuel, Chairman of the Development Committee, and World Bank President Wolfensohn (for press)

A briefing and strategy session on Trade/Finance Coherence, for civil society doing policy advocacy on trade and all financial policy.

September 29 Annual Meetings *

Concluding press conference by Ahmed bin Abdul Nabi Macki, Minister of National Economy and Deputy Chairman for Financial Affairs, Oman, and Chairman of the 57th Annual Meetings, IMF Managing Director Koehler and World Bank President Wolfensohn (for press).

September 30 Consultation on the World Bank's Structural Adjustment Lending Policy. ***

"Services for All" Pilot Workshop: hears voices from the South; learn about how companeis behave when entrusted with essential services; understand the power behind the privatization agenda; learn the ABCs of GATS; discover how development banks advance the WTO agenda.

International Struggles: hear first-hand about struggles against privatization in Africa, Asia, and Latin America.

October 31 "Services for All" Workshop: strategizing session. As a continuation of events of September 30, strategize with groups from around the world about how to make the voices of citizens heard and respected in the corridors of power.

Bank Information Center website
World Bank website

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

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