Down to Earth IFIs Update

On 6 August 2003, thousands of peasant farmers, labour unions and NGO activists demonstrated in front of the Parliament building to demand the shelving of the draft Water Resources Legislation and to state their opposition to plans to privatise water - as is implied within the draft legislation.

Thousands of peasant farmers from Karawang (West Java) explained that since the Jatiluhur Jasa Tirta II authorities took commercial control over the local river, they no longer have access to irrigation because the industrial sector – which is able to pay more for water resources - has become the authority's priority. Reduced access to water for both irrigation and day to day purposes has become the main problem facing the peasant farmers today. In Klaten (Central Java) peasant farmers have also experienced reduced access to water for irrigation purposes since control of the river was taken over by PT Aqua. Later on in the same day, the Department for Resettlement and Regional Development held a press conference on the Draft Water Resources Legislation. A number of NGO activists from the Indonesian Consumers Association (YLKI), the Indonesian Forum on Globalisation and the Anti-Debt Coalition had the opportunity to discuss the problems that are associated with this legislation. The Minister for Resettlement and Regional Development, Soenarno, stated that the Water Resources Legislation needed revision because existing legislation had not been revised for over 30 years, and did not accommodate principles of decentralisation, justice and democracy. The government has not openly admitted that the Draft Water Resources Legislation is a condition for the World Bank's WATSAL loan (Water Resources Sector Adjustment Loan - see IFI Fact sheet No.28 on water privatisation).

Within WATSAL scheme, the World Bank has promised a loan of US$ 300 million to be disbursed in three stages. US$ 150 has already been disbursed in 2 tranches with the condition that a number of regulations and presidential decrees be issued which liberalise water sector. Another US$ 150 will be disbursed as soon as parliament passes the Draft Water Resources Legislation. NGOs are of the opinion that the World Bank has dictated to the government that it should draft the Water Resources Legislation as part of the conditions for disbursement of the loan. WATSAL and the Draft Water Resources Legislation are the first step on the road to the privatisation of the water sector.

On 19 September 2003, the People's Coalition for the Right to Water demonstrated outside the World Bank's offices in the BEJ Building but they refused to meet with the World Bank because the World Bank would not allow journalists to attend the meeting. The Coalition acknowledges the need for new Water Resources Legislation, but reject the current draft, which does not in any way consider the needs of the people. In addition, the Coalition also criticised the process leading up to drafting the legislation for its lack of transparency. The process of public consultation, an important means by which to assess public needs and aspirations, was not at all transparent.

Plans to pass the Draft Water Resources Legislation on 23 September 2003 were delayed because the World Bank itself planned to review this legislation. The Indonesian government is desperate to pass this legislation as swiftly as possible as this will have an impact on the disbursement of the US$ 150 million loan from the World Bank for the 2004 state budget.

Sources:
utang@yahoogroups.com
southasia_ngoforum@yahoogroups.com
http://www.walhi.or.id

World Bank Projects

In July 2003, the World Bank made loans totalling US$ 460 million for three projects to be disbursed via the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The IBRD loan has an interest rate of 2.5% with a repayment period of 20 years, whilst the IDA loan has a 0% interest rate and a repayment period of 40 years.

Kecamatan Development Project (PPK) stage III US$ 204 million (IBRD) and US$ 46 million (IDA). The PPK is a people's development programme with the joint-goals of poverty reduction and raising the capacity of village institutions via community planning mechanisms.

Water Resources and Irrigation Sector Management Programme stage one US$ 45 million (IBRD) and US$ 25 million (IDA). This programme encourages surface and groundwater and infrastructure management which is sustainable and equitable, raising the household income of irrigation peasant farmers and guaranteeing regional food security as well as sustainable management that takes cost efficiency into consideration. This water project runs parallel to a similar project funded by the ADB and JBIC (Japan Bank for International Corporation). This programme is not included in the WATSAL scheme but still represents part of the overall effort to prepare infrastructure and institutions for the privatisation of water and for attracting investors.

Java Bali Power Sector Restructuring and Strengthening Project. This project supports the implementation of the plan to restructure the state-owned electricity company, PLN, and strengthen electrical supply infrastructure. In addition it will assist the state-owned gas company, PGP, to prepare plans for restructuring and distribution. Funding for this project totals US$ 212 million, made up of a US$ 140 million World Bank loan and an Indonesian Government loan of US$ 70 million.

Indonesia continues to be an important World Bank client, as stated by Andrew Steer, Director of the World Bank for Indonesia. The World Bank will continue to provide assistance to rehabilitate the economy. The three projects outlined above are considered to have an important role in the consolidated effort to reduce poverty and improve Indonesian infrastructure's ability to support economic growth.

Although Indonesia is free from the IMF, its ties to the World Bank – which together with Japan is the biggest post-IMF donor (see IFI Update 33) – are still strong. This means that Indonesia remains tied to a number of borrowing conditions in order to prepare its institutions and infrastructure in the interests of growth, investment and the market.

In addition, in September 2003, the World Bank injected additional funds to finish off the development of the Jakarta-Bandung railway. This US$ 65.2 million project should have been finished by September 2002, but was extended to September 2004 with additional funding of Rp. 20 billion from the World Bank. According to Taufik Hidayat, Executive Director of Indonesian Railway Watch, steps to provide additional funding should follow demands for accountability of the project head, consultants and project planners for failing to complete the project according to the original deadline.

Sources:
http://www.worldbank.org/projects
Jakarta : Mohamad Al-Arief. Email malarief@worldbank.org
Washington : Kimberly Versak. Email kversak@worldbank.org
Kompas, 5 September 2003

ADB Infrastructure Project

Umar Hadi, Head of the PLN's Palu branch, stated in a meeting with the local parliament that the ADB has allocated an undisclosed total of funds to pay for the reconstruction of the Danau Lindu Hydro-power project. The ADB paid for the development of the 75 MW project from 1994, to supply electricity to North Sulawesi, but in 1997 the ADP stopped payment due to NGO protests.

According to a number of NGOs, the project has resulted in the destruction of the Lore-Lindu National Park. News spread that six villages located around Lindu Lake would be flooded as a result of raising the water level of Lindu Lake in order to operate the power station. However, the government stated that this threat had been overstated because studies carried out by the PLN itself and a number of universities suggested that the lake's water level did not need to be raised in order to operate the power station.

During the last five months, the ADB has disbursed US$ 1 trillion on 72 projects. Around 40% of ADB loans have been allocated for development projects in three Indonesian provinces - North Sumatra, East Java and Nusa Tenggara Timur. The 21.73 Km Semoi Sepaku – Petung highway in East Kalimantan project has been allocated Rp. 9.46 billion from the state budget and from overseas aid, namely the ADB via the IBRD.

The Department for Resettlement and Regional Infrastructure, with support from an ADB grant, has prepared the "Project Preparation Technical Assistance (PPTA): Neighbourhood Upgrading and Shelter Sector Project/NUSSP (ADB TA-3895 INO)". NUSSP is part of the poverty reduction programme that is eligible for ADF credit (soft loan), which aims to upgrade 5,000 ha of degraded housing areas and raise the quality of life of 2 million inhabitants in 30-40 towns in Indonesia. This project is also intended to increase the capacity of government administration at local level and to develop tripartite co-operation between civilians, government and the private sector.

This programme adopts the TRIDAYA concept approach, as detailed in the National Housing and Resettlement Policies and Strategies (KSNPP) as determined by the Minister for Resettlement and Regional Infrastructure's Decision in his capacity as Head of the BKP4N No. 217/KPTS/M/2002 of 13 May 2002. The targets of these activities include: (i) strengthen the capacity of the government and the people in housing and resettlement; (ii) neighbourhood upgrading; (iii) housing finance. These neighbourhood upgrading development programmes as funded by both the ADB and World Bank are a part of the urban poverty reduction programme. The World Bank programme for urban poverty reduction known as the PRKP (Urban Poverty Reduction Programme) uses the same mechanisms, such as the PPK (Kecamatan Development Project). Infrastructural development itself is not the final aim, but rather the building of institutions or co-operation is the focus. In the end these efforts must be seen as part of the effort to prepare infrastructure with an urban administrative management that will support growth and investment that will have an impact on poverty reduction.

Sources:
INFID's Short News Overview No. 138: June 20 - 26, 2003 http://www.infid.be/shortnewsoverview.html
Asia Pulse 07/07
http://www.kimpraswil.go.id/Humas/news2003/ppw0808031.htm
http://www.kimpraswil.go.id/Humas/news2003/ppw0708032.htm

ADB-NGO partnership in Poverty Reduction

Following on from the recommendations from consultations on a co-operative framework between the ADB, NGOs and government, held in 2002, the ADB has agreed to provide a regional technical assistance grant (RETA) of US$ 500,000 for NGO Partnership for Poverty Reduction. This technical assistance aims at strengthening long term strategic partnership development between NGOs and the government within the context of poverty reduction in the Asia-Pacific region.

Indonesia itself will receive a maximum of US$ 50.000 that will be disbursed to a number of NGOs in order to carry out innovative poverty reduction or national development projects or other activities that are strategically related to ADB activities in Indonesia. After the government agreed to the implementation of technical assistance, the ADB Indonesian Resident Mission put forward the names of 30 NGOs who might received this technical assistance funding. They are NGOs that have been actively involved in the consultation process in Indonesia last year.

Sources:
forumadb@yahoogroups.com
sawarung@bdg.centrin.net.id

Contact Person:
ahariandja@adb.org or asundari@adb.org

Indonesian Government's IMF Exit Strategy Decision

The government opted for the Post Programme Monitoring (PPM) exit strategy (see IFI Fact sheet June 2003), which means paying off the IMF debt according to schedule. The total debt owed to the IMF is US$ 9 billion, to be paid off by 2010, but the government has promised to have payment complete by 2007. If the government pays US$ 2 million per annum until 2006, the remainder owed will be US$ 3 million, or no more than 100% of IMF loan quota. This means that after 2006 Indonesia will become an ordinary member of the IMF. By speeding up payment, fiscal reserves of US$ 34 million will only be reduced by US$ 6 million, with US$ 28 still remaining.

The Anti-Debt Coalition asked the government to agree to the MPR's suggestion that repayment should be made in this manner in order that Indonesia's debt doesn't go over the 100% quota, so that Indonesia can return to being an ordinary member. The government should immediately revise the PPM policy because PPM still allows for IMF intervention. There will be continued pressure on the government to reduce subsidies on fuel, education and health, as well as to stimulate national economy. Mobilisation of funds will be forced in order to increase tax revenues and to implement privatisation.

Sources:
Kompas, 8 August 2003
Tempo Interaktif 30 June 2003
Press Release Koalisi Anti Utang 11 August 2003 at www.kau.or.id

Japanese loans: Japan continues infrastructure projects whilst ignoring the Kotopanjang case

WALHI has asked the Japanese government to write off the Indonesian Government's debt that was incurred to pay for the building of the Kotopanjang dam in West Sumatra, a total of 31 trillion yen. Longgena Ginging, WALHI's executive director, stated that the building of the dam had destroyed the habitat of elephants that lived in the area around the dam. In addition, the reservoir and the power station that was planned to produce 114 MW has only succeeded in producing less than 30 MW.

Nevertheless, the Japanese government continues to turn its attention to the problems of economic infrastructure in order to attain sustainable economic growth as implemented by the private sector which represents a priority of Yen loans.

In August 2003, the Japanese government made a loan to develop the airports in Surabaya and Palembang. Loans for stage II development of Surabaya airport of ¥ 15.007 billion (around US$ 125 million or Rp. 1.06 trillion) and for Palembang airport a total of ¥ 8.826 million (around US$ 74 million or Rp. 620 million).

Sources:
Jakarta Post 02/07
http://www.id.emb-japan.go.jp/news03_38.html

World Bank: Environment Monitoring Report in Indonesia

In July 2003, the World Bank Environment Co-ordinator for Indonesia, Thomas, E. Walton, published the Indonesian Environment Monitoring Report in the name of the World Bank. This report represents part of the monitoring programme for the East Asia region that was carried out in 2000. This activity was intended to monitor environmental trends in the East Asia and Asia Pacific region. The monitoring gives a broad overview of air, water and soil pollution, main sources of pollution and related threats to health and natural resources. In Indonesia, this monitoring represents the first step in what will be a routine activity, namely to monitor trends and conditions.

The report itself indicates that Indonesia has made some significant steps in dealing with pollution, including the removal of lead from petrol in Jakarta as well as a reduction in emissions that deplete the ozone layer. However, there are still a number of problems to be addressed.

Summary of the results of the monitoring:

1. Air quality in Indonesia still under threat, with the result of increased health problems and reduced productivity. Air pollution in the urban centres, particularly by lead and other pollutants is of concern and a threat to health in general in Indonesia. Other pollutants include sulphur, NO2, carbon monoxide, and ozone. Increased urbanisation, vehicles and industrialisation represent threats to air quality. Motor vehicles on the road increased by 6 million between 1995 – 2000. Forest fires due to large scale land conversion has resulted in air pollution not only in Indonesia, but also in neighbouring countries.

2. Annual water supplies are very high, at 13,700m3/capita, but rivers in Indonesia are usually polluted by industrial or household waste. The level of sanitation and sewerage treatment is the lowest in Asia, and this results in widespread contamination of ground water and surface water. A number of towns in Indonesia do not have a good sewerage system, and many people throw waste into rivers and canals. As a result, there are a number of digestive-tract infections.

3. During the last five years, waste production has increased significantly. The disposal and processing of dangerous waste is poor with the result that there is soil, air and water degradation, which also impacts on health. Open waste tips are still usual in Indonesia, and 90% of waste is disposed in this manner. As a result, there is further soil pollution and an increase in the spread of pests and disease. Some waste which goes uncollected is burnt, which increases air pollution in urban areas, or thrown into waterways and rivers. This increases the risk of flooding which spreads pollution to other lowland areas.

1. Air pollution
   • Petrol which still contains lead must be banned all over Indonesia, not just in Jakarta.
   • There needs to be increased understanding and knowledge, analysis and awareness of air quality and forest management issues.
   • Increase awareness of air pollution in the home and its impact on health.

2. Water pollution
   • Improve water supplies and knowledge of appropriate and realisable sanitation systems that will reduce deaths due to diarrhoea.

3. Dangerous waste
   • A study concerning waste trends is needed in order to determine appropriate waste disposal policy.
   • People's participation is necessary in order to determine possible waste disposal practices and controls.
   • Institutions need greater authority, particularly at municipal level, together with appropriate funding mechanisms.

Summary of consultation: A Look at Asia Pacific's Extractive Industry (see IFI Update May 2003) in Bali has already been published. Main issues discussed include bad governance in the form of corruption, conflict resolution, management; human rights; environmental issues (global warming and pollution of the seas), as well as uncontrolled development of small and micro-scale mining.
The summary is at: www.eireview.org