Down to Earth IFIs Update

International Crisis Group (ICG), the Brussels based research institute, has released a report on Indonesia entitled ‘Bad Debt: the politics offinancial reform in Indonesia’. The Report recommends the IMF scales back the program outlined in the Letters of Intent by favouring broad targets over unduly specific commitments and thatbilateral donors consider further rescheduling or easing of terms on Indonesia's debt. The report examines the measures agreed by Indonesia and its externallenders to reduce the public debt that is central to and symptomatic ofthose financial difficulties. It attempts to explain in political andinstitutional terms why the implementation of these measures has often run into difficulty and suggests ways in which the process might be made moreeffective and transparent. Through a series of Letters of Intent since October 1997, Indonesia and the IMF have agreed on renegotiating debt repaymentschedules, cutting subsidies, increasing tax revenues, sellinggovernment-owned commercial assets, and restructuring private debt to the state.

Meanwhile, an International Monetary Fund (IMF) review team which started talks in Jakarta this month with the Indonesian government, is likely to spend two weeks studying the country's economic reform program. The team is reviewing Jakarta's progress in meeting economic reform commitments, to determine whether to release a 400 million dollar loan that has been frozen since December. The loan tranche has been on hold because of IMF disapproval of the pace of Indonesia's reforms, including its insistence on a central bank law amendment, which the Fund fears will compromise the bank's independence. The government of Indonesia will ask for an additional loan from the International Monetary Fund. The arrival of the review team, however, was seen as sign of a thaw in the stand-off between the IMF and the government.

The full ICG report can be accessed at http://www.intl-crisis-group.org/
(From this page, go to the "Indonesia" page where the report is listed.)

Sources: Antara, April 12; South China Morning Post, April 12; Asia Pulse, April 12; Jakarta Post, April 11; Jakarta Post, March 23, 2001.

Interim CGI meeting approaches as GoI needs more money

An interim CGI meeting will be held in Yogyakarta on April 23/24. The Indonesian government (GoI) must submit a report to the group of donor countries and institutions on its achievements since the last CGI meeting in October in Tokyo. The report must contain at least four items: illegal logging, alleviation of poverty, fiscal decentralization and good governance. Indonesia may find more CGI lending unavoidable as the state budget deficit has expanded much more than expected due to lower GDP growth and Rupiah weakness. Millions of teachers, postal workers and other civil servants could be out of pay by November when the Indonesian government is expected to run out of funds and its budget deficit to balloon to over 75 trillion Rupiah.

Source: Straits Times, April 4, 2001.

New World Bank report warns Indonesia's richest habitats gone by 2010.

The World Bank has warned that Indonesia's richest natural habitats could be completely obliterated by 2010 if significant measures are not taken to deal with the widespread degradation of the country's natural resources. "The richest habitats, especially lowland forests outside protected areas, are likely to be completely cleared in Sumatra by 2005 and Kalimantan by 2010," according to the report, titled "Environment and Natural Resource Management in a Time of Transition." The report says areas rich in resources have been devastated by huge forest fires, made worse by indiscriminate clear-cutting.

The report is available on the World Bank Web site http://www.worldbank.or.id

Indonesia to push for easing of forestry debts

Indonesia will promote the easing of debt burdens on private forest concession holders in return for turning some forests into conservation areas. The government will close down forest concessions with serious debt problems and turn the areas into conservation areas. But it will also require that creditors reduce the debt burden on concession holders involved. According to recent government data, around 34 million hectares are currently being managed by 293 concession holders. Concession holders were allotted between 20,000 hectares and two million hectares under 20 year terms extendable to 35 years.

Source: AFP, March 30.

GoI signs new agreement with ADB and braces itself for protestors

In April the GoI signed a new cooperation agreement with the Asian Development Bank (ADB) which will pump hundreds of millions dollars in soft loans into poverty-alleviation programs in Indonesia. The Manila-based multilateral lending institution has promised to provide Indonesia with between US$600 million and $1.2 billion in loans per year over the next four years until 2004, contingent upon the government's commitment to reforms. ADB has said that only 40 percent of the loan would be allocated for poverty reduction in Indonesia. ADB Jakarta representative Jan Van Heeswijk said that the bank's commitment for 2001 was $1 billion.

The World Bank at the same time canceled a US$300 million anti-poverty loan to Indonesia that it planned to disburse by the end of last year due to the slow pace of reform in the country.

Meanwhile, federal, state and county resources are being heavily tapped to provide security for the Asian Development Bank meeting in May (9-11) in what is being described as the largest law-enforcement operation ever in Hawai'i. The ADB, established in 1966 and based in Manila, Philippines, had planned to hold its 2001 conference in Seattle, but federal officials changed the site because of the 1999 violence there. Sixty finance ministers and their entourages from Asian and Pacific nations will attend.

Source: Jakarta Post, April 9, 2001; Dow Jones Newswires, April 12.

IMF and World Bank Spring Meetings agendas

At the World Bank and IMF Spring Meetings (end of April), government ministers will discuss the following items in their committees - streamlining conditionality, surveillance implementing codes and standards (including public debt management and insolvency), the global economy and the IMF Evaluation Unit.

Information on NGO events will be available as the Bretton Woods Project launches a media page on its website in time for the Spring Meetings. This will give information on NGO events and report launches, plus contacts for people who can discuss the items on the official agenda.

More information at
http://www.brettonwoodsproject.org/media
http://www.imf.org

Bank Civil Society newsletter

The World Bank has re-launched its newsletter aimed at civil society groups. The first issue contains material on the Information Disclosure Policy review, forest policy, environment strategy, Poverty Reduction Strategies, the Development Gateway, World Bank Rural Strategy etc. The newsletter seems, however, only to contain references to Bank meetings and reports, with not a single link to a non-World Bank website or independent publication.

Further details at http://www.worldbank.org/ngos
Or email ngo@worldbank.org

IMF muscles in on "Asian Fund"

Asian countries may be blocked from setting up an independent regional currency swap mechanism. This was intended to allow countries facing financial crisis to draw US dollars from one another's foreign exchange reserves without involving the IMF. But the US government is now insisting that the IMF be allowed to set and supervise the conditions for the operation of this facility. A Third World Network statement says the move "would reduce the proposed facility to an appendage of the IMF" and called on Asian governments to ensure its independence.

E-mail to twnet@po.jaring.my

‘Fighting Neo-Liberalism In The Asia-Pacific’

The Asia Pacific Peoples' Solidarity Conference will be held in Jakarta, Indonesia, 7-10 June, 2001, organised by the Indonesian Centre for Reform and Social Emancipation (INCREASE). The aims of the conference are to: raise awareness in Indonesia about neo-liberal economic policies and the IFIs' role in promoting them and how local campaigns can link into the fight against neo-liberalism; feed into the process to develop alternatives to IMF reforms; deepen cooperation and linkages within the region and with other regions.

E-mail to increase@indo.net.id