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The Asian Development Bank (ADB) approved in November 29, 2001 a USD 100 million grant for an education project to help some 1.26 million poor children. The Bank states that the grant will support the continued decentralisation of basic education management in Indonesia and will be implemented by local governments, communities and schools in rural districts in Nusa Tenggara Barat Province, poor districts in Bali, and impoverished communities in Jakarta.
On December 4, 2001 the ADB approved a USD 400 million loan, entitled State-Owned Enterprise Governance and Privatisation Program. The program aims to improve public sector resource allocation, make state enterprises more profitable, and promote the private sector's participation in the state enterprises' commercial activities.
Coordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti said that Indonesia is seeking a loan of USD 1.2 billion from the ADB for the 2002 budget. Minister Dorodjatun says that the loan is to be used for job opportunity creation. Earlier, during a meeting with Indonesia President Megawati, ADB President Chino said that the Bank is maintaining its lending levels to Indonesia at between USD 600 million to 1.2 billion per year. President Chino further said that the lending will depend on Indonesia's needs as well as the government's capacity to absorb ADB's assistance effectively. Obviously, Indonesia is aiming at the highest amount possible to tap relatively cheap sources of foreign loans but it has yet to clarify how the loan will be used effectively.
Sources:
ADB News Release http://www.adb.org/Documents/News/2001/nr2001179.asp
ADB Project Profile http://www.adb.org/Documents/Profiles/GRNT/35178012.ASP
Associated Press (AP), December 4, 2001
AFP, December 1, 2001
AFX-Asia, October 29, 2001
Next Paris Club Meeting Scheduled for February 2002
The Paris Club has finally scheduled a meeting for restructuring Indonesia's debt. In February 2002, Indonesia will seek a rescheduling of at least USD 2.6 billion in debt to help ease the burden of the 2002 state budget. The government's domestic and foreign debt is roughly USD 132 billion, or 100% of GDP. Servicing this debt accounts for 42% of Indonesia's annual budget. The government has failed to meet the USD 650 million revenue targeted from asset sales and privatisation, as promised to the IMF. Plunging oil prices are threatening to blow a USD 880 million hole in the 2002 budget, adding another headache for the government as it struggles to meet revenue targets.
In the meantime, the government plans to reschedule some USD 6 billion in sovereign debt maturing between 2002 and 2004.
Source: The Jakarta Post, November 15, 2001
Dutch Banks Stop Financing Oil Palm Plantations
Three of the top four Dutch banks—ABN AMRO Bank, Rabobank, and Fortis Bank—have decided to stop or substantially restrict the financing of the development of oil palm plantations, which destroy tropical rainforests. This is the result of a joint campaign by Sawit Watch Indonesia, Friends of the Earth Netherlands, and Greenpeace Netherlands.
On October 31, 2001, these banks declared that they would only fund plantation companies that (a) do not involve themselves in burning forest land and clearing tropical rainforest; and (b) respect the rights and wishes of local communities, Indonesia's law, and relevant international conventions.
(For further information: www.focusonfinance.org/Dutchbanks2.htm)
ADB Environmental Policy Draft Weakens
The ADB is in the process of finalising its working draft of the Environment Policy—the first of its kind since it was established in 1966. Several versions of working drafts have been circulated for comments and public consultation. The latest draft—December 2001—has more coverage of important issues than the previous drafts but lacks provisions on how the bank will implement and be held accountable for the issues raised in the discussion.
This serious flaw has caused 40 groups from 15 countries to send a letter to President Chino, urging him to revise the working draft to strengthen the implementation, enforcement, and accountability of environmental considerations before it is submitted to the Board for approval. The December draft is subject to management review in January 2002. There is no date for Board approval yet.
(Source: http://www.bicusa.org/mdbs/adb/adbenvpo.htm)
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Indonesia Considers Debt-for-Nature Swaps
According to Finance Minister Boediono, Indonesia is considering debt-for-nature swaps as one way to pay its debts. A number of creditor countries such as the US and Germany have shown interest. Minister Boediono said that he has started the discussion on this matter with the Ministry of Environment but said that he did not know yet the technicalities of how this mechanism works. He thinks that only a small amount of debt will be able to be swapped through this mechanism.
(Source: Detikcom, November 9, 2001)
New IMF Letter of Intent and Disbursement by Year-End
Finance Minister Boediono said on Monday that he expects the IMF to disburse a new USD 400 million loan to Indonesia by the year's end. The new Letter of Intent is to be signed by early December. The IMF team, led by Senior Advisor for the Asia Pacific Department, Daniel Citrin, was in Jakarta in mid-November 2001.
Discussions with the Fund centred on this year's budget, which will likely overshoot its deficit target. The government is negotiating with the IMF to cut expenditures so as to keep the deficit within target.
(Source: Dow Jones Newswires, November 12, 2001)
New Database Catalogues USD 20 billion in WB-Financed Dirty Energy Projects
The Washington-based Institute for Policy Studies has launched a global database on World Bank investment in more than 200 projects that extract, transport, or burn fossil fuels since 1992, amounting over USD 20 billion. The database is available at www.seen.org. The IPS database catalogues all World Bank-financed fossil fuel projects on a map-based database, together with each project's lifetime greenhouse gas emissions estimate. IPS found that the sum of lifetime emissions from World Bank projects financed from 1992 to the present will exceed 40 billion tons of carbon dioxide, a figure almost twice that of all global emissions from burning or flaring fossil fuels in 1998.
On October 29, 2001 global climate negotiations began in Marrakech as well as the World Bank's new Extractive Industries Review, led by Indonesia's former Minister of Environment, Dr. Emil Salim, in Brussels. At a time when global leaders are supposedly doing all they can to stop the potentially catastrophic effects of global warming, this database demonstrates that the World Bank's fossil fuel investments are contributing to the problem significantly. The World Bank is home to the Global Environmental Facility (GEF), the key institution charged with the task of financing alternative energy and energy efficiency projects and was created by the Climate Convention at the 1992 Earth Summit (See DTE Factsheet December 2001 about GEF).
Source: Sustainable Energy and Economy Network (SEEN) www.seen.org
IFC Investment in Indonesia Still Suspended
The International Finance Corporation (IFC), the private sector arm of the World Bank Group, said that it will continue to suspend its investment in Indonesia until it sees concrete improvements in the country's legal environment. The suspension has been in effect since March 2001. IFC investment in Indonesia is around USD 720 million.
The IFC has been embroiled in legal disputes involving two companies it invested in in Indonesia. One of the cases concerns PT Panca Overseas Finance Indonesia (POFI). The IFC filed a bankcruptcy petition against POFI last year for unresolved debts amounting to USD 13 million. The petition was rejected by the commercial court last January, due to what the IFC suspects were fictitious creditors voting in favor of POFI.
The IFC acknowledges that legal reform can take years, yet the IFC needs only the first concrete signal of progress to reactivate its investment in Indonesia. Indonesia is IFC's seventh largest country portfolio.
(Source: Jakarta Post, November 9, 2001)
Indonesia, Norway Launch USD 2.2 million Development Program
The governments of Indonesia and Norway launched in November 2001 an integrated program to ensure continued growth while at the same time satisfying the needs of environmental protection in Riau province. The program will allow both industrial and environmental needs to be taken into account. The program has three project components:
(Source: The Jakarta Post, November 14, 2001)
World Bank's Extractive Industries Review Consultation in Lombok, February 2002
To follow up criticism of the World Bank Group's activities in extractive industries (oil, mining, gas sectors), World Bank President Wolfensohn set up a Review team led by Dr. Emil Salim. According to the World Bank, the Extractive Industries Review (EIR) is a process to discuss its future role in the extractive industries with concerned stakeholders. The aim is to produce a set of recommendations that will guide involvement of the World Bank Group in the sectors of oil, gas and mining. A number of independent citizen groups have been watching the process, development of the terms of reference, selection of advisors to the Eminent Person (Dr. Emil Salim), and implementation of the review.
After holding a Planning Workshop in Brussels on October 29-30, 2001, the Review Team is now planning three regional Consultation Workshops. The first of these is in Lombok, Indonesia, on February 13-15, 2002. Stakeholder groups are invited to self-select participants for the regional workshops by December 31, 2001. Dr. Salim has yet to announce to the public the procedures of the self-select process and how to contact the EIR team.
(Source: www.eireview.org)
World Bank Projects/Programs in the Pipeline
The following is a summary of World Bank-funded projects/programs for Indonesia that are still in the preparation stage. Civil society is encouraged to take a closer look at projects/programs in the preparation stage to request for more information, give comments, or demand consultations. A summary for each project is available at www.worldbank.or.id, go to "Bank Operations" and click "projects in pipeline".
| Project Name | Sector | Total Project Cost (USD million) | Environmental Category |
| Basic Education Project (04) | Education | 66 | C |
| Community-Driven Urban Development Project | Urban Development | 180 | B |
| Eastern Indonesia Region Road Project | Transportation | 264 | B |
| Energy Projec | Electric Power & Other Energy | 230 | A |
| Global Development Learning Project (LIL) | Education | 2.5 | C |
| Health Workforce and Services Project | Health, Nutrition & Population | 108 | C |
| Land Administration Project (02) | Public Sector Management | 90 | A |
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