Down to Earth IFIs Update

The IMF has completed its tenth review of the implementation of Indonesia's economic reform programme and has agreed the disbursement of a US$ 493 loan under the Extended Fund Facility (EFF). Now the government must complete another programme which will be followed by the final tranche of the loan and that will end the collaboration between Indonesia and the IMF in December 2003.

On 15 September 2003, the Bank of Indonesia and the government issued a press statement about the post IMF option that was eventually chosen. This was the Post Programme Monitoring option (PPM) over a period of 18 months, which is in fact a continuation of the IMF programme. Although it was said that the Indonesian government would be able to draft its own economic policies, in reality, Indonesia is still under the supervision of the IMF. Except that this time the supervision is "softer" because it is in the form of dialogue and not loan disbursement conditions. The choice was referred to in a White Paper that was legalized by Presidential Instruction (Inpres) No.5/2003. (See also Factsheet 30 on Indonesia's post IMF options,)

Anne Krueger, Deputy Executive Director of the IMF, stated that the IMF was pleased with Indonesia's decision to no longer request exceptional or emergency loans from the IMF after the end of the final programme. However, Indonesia may still receive IMF support during the time that the programme is still running as well as extend policy dialogue with the IMF within the framework of the PPM.

The PPM choice was made in the name of maintaining investor confidence. Indonesia is able to pay off its debt in instalments, but may no longer request debt rescheduling via the Paris Club. This is of some concern because it may influence the availability of future budget funds bearing in mind that increased investment demands guaranteed social and political stability. Even if macro economic "stability" has been attained over the last few months, the government must still act with caution in the lead up to the 2004 General Election.

Sources:
www.bi.go.id/bank_indonesia2
The government's post IMF plan and target log frame may be viewed at: www.bi.go.id/bank_indonesia2/info_terbaru
Jakarta Post 16/09, 09/10
Kompas 10/10
www.laksamana.net/vnews.cfm?ncat=3&news_id=6061

The World Bank: US$ 243 million for development projects

The two projects are the Java-Bali Electricity Sector Restructuring and Strengthening Project and an extension of the Provincial I and II Health Project (PHP I& II). As with other state industries, the state-owned electricity company (PLN) and the state-owned gas company (PGN) must carry out financial and corporate restructuring leading in the direction of privatisation. Andrew Steer emphasized that the World Bank is supporting investment in the health and infrastructure sector in order to strengthen growth in Indonesia.

Source:
www.worldbank.org/projects and www.worldbank.or.id/ Contact:
Contact:
Finance Department, Republic of Indonesia
Eddy Effendy (021) 384 6663
0816-843717
edy.sj@depkeu.go.id

World Bank office, Jakarta
Mohamad Al-Arief (021) 5299-3084
malarief@worldbank.org

Forest Investment Forum

1. important perspectives plus opportunities and obstacles faced by the private sector when investing in developing countries and countries in economic transition;
2. steps that must be taken by the World Bank and the Forum in order to achieve a policy framework and institutions for investment in the private sector; and
3. drafting a best practice guide to environmentally and socially sustainable and responsible forestry exploitation management.

The meeting, attended by around 150 people, resulted in an agreement to end the practice of illegal logging, corruption in the forestry sectors and to step up forest conservation campaigns. The Forum also agreed on the importance of developing policies and institutions to control these practices. Next year, the Forum plans to build a wider consensus on these issues as well as look for alternative small-scale funding, and encouraging small and medium scale businesses as part of the campaign to protect the forest.

The Forum's biggest deficiency, which drew sharp criticism from NGOs, was its failure to involve representatives of indigenous peoples, forest dependent communities and organisations that are directly involved in protecting forests and forest peoples.

The aim to encourage logging and forest plantation companies to be socially and environmentally engaged may well be a good one. However, transferring the responsibility to reach sustainable development targets to the private sector is an unhealthy idea.

This is to deny the character of an economic system in which companies compete with eachother and in which the primary aim to make profits and increase share value.

In 2002, the Bank's Operations Evaluation Department (OED) published a report entitled Promoting Environmental Sustainability in Development - An Evaluation of the World Bank's Performance, which described a weakness in dealing with environmental issues in private sector activities (OED 2002, p.14).

This report also says that "the current system does not provide the appropriate accountability structures to meet the Bank's commitment to incorporate environmental sustainability into its core objectives and to mainstream the environment into its operations" (OED, 2002, p.24). The conclusion of the report is that "Fundamental reform of implementation and accountability processes is critical" (OED, 2002, p.21).

Without reform and wide participation from representatives of indigenous peoples and other groups concerned with protecting forests and forest peoples, the Forest Investment Forum will only damage further the World Bank's credibility in the eyes of people who suffer its impacts.

Source:
lnweb18.worldbank.org/ESSD/ardext.nsf/14ByDocName/EventsForestInvestmentForumOct2003
www.foei.org/forests/letter.html
OED report: lnweb18.worldbank.org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/4389E49A874A0EC785256B61005FA2B1/$file/environment.pdf

Contact: Dr. Marcus Colchester, Director Forest Peoples Programme Email: marcus@fppwrm.gn.apc.org

More information about this Forum may be found at:
www.worldbank.org/sustainabledevelopment or contact John Spears at: (jspears@worlbank.org), Sergio Jellinek (sjellinek@worldbank.org) and Kristyn Ebro (kebro@worldbank.org).

ADB: new projects agreed

The Rural Micro-Finance programme to be implemented by the Department of Agriculture in two stages, the first to a value of US$ 123.80 million and the second, US$ 600,000. This project aims to improve the access of village and agricultural enterprises to micro credit facilities that have already been institutionalised.

Contact:
Department of Agriculture: Yandri Ali, yandri@deptan.go.id, tel/fax. 62-21-7816085 or Endang Setyawati, endang@deptan.go.id, tel/fax. 62-21-7816085/7818654 ADB Project Officer: Paolo Spantigati (pspantigati@adb.org)

Gas Generation from Waste This is a technical assistance to the value of US$ 500,000 with the aim of finding ways of reducing the greenhouse effect from agro-industry activities. These aim is to produce guidelines on waste management in the oil palm industry and a mechanism to commercialise the use of methane gas from waste.

Project Officer
Sujata Gupta (632-6575)
Infrastructure Division, SERD
sgupta@adb.org

Gas Pipes Development The state-owned gas company, PGN, has formed a consortium with a number of multilateral banks in order to build a 1,800 km gas pipeline between East Kalimantan and East Java at an estimated cost of US$ 1.5 billion. This development aims to overcome the gas supply shortage in East Java. The ADB, World Bank and a number of US banks have already promised financial support of US$ 450 million. The PGN is contributing US$ 300 million, whilst the remaining US$ 750 million will be sought from other sources. This consortium is using the production sharing principle in order to attract potential investors.

These new projects are part of the ADB's poverty reduction strategy in urban and rural areas. With this strategy, the ADB believes that the development of infrastructure and institutions will support growth that will eventually contribute to poverty reduction. The ADB is one of a number of organizations that is committed to attaining the Millennium Development Goals (MDGs) in poverty reduction.

Sources:
www.adb.org/Documents/ADBBO/AOTA/35130022.ASP
sites.stockpoint.com/highmarkfunds/newspaper.asp Asia Pulse 24/09

Annual IMF-World Bank meeting in Dubai September 2003

Delegations from 184 countries and 2,000 journalists attended the annual IMF-World Bank meeting in Dubai, UEA, on 23-24 September 2003. In this meeting, the world's economic leaders emphasized the need for further efforts in order to attain millennium development goals, namely to improve the condition of developing nations by 2015. The World Bank also took the opportunity to launch its latest publication, World Development Report 2004: Making Services Work for Poor People (at www.worldbank.org).

At the meeting, developing nations demanded a greater voice in development and international trading issues, and denounced what they described as "the lack of democracy" in the World Bank and the IMF. Poor countries have become aware that the World Bank and the IMF have already included democratisation preconditions as part of loan and assistance conditions, but the process for reaching decisions within the two organizations are not democratic. Responding to the demands of the developing nations, World Bank President, James D Wolfensohn, stated that it was up to the World Bank and IMF members to decide whether to give a bigger voice to the developing nations.

The head of the IMF, Horst Koehler, stated his conviction that the problem of voting equity could be agreed by consensus. In reality, whether we prioritise the interests of the poor nations or the interests of international financial stability, what is needed is financial ability of the nations who are able to provide this capacity.

The governor of the Pakistan Central Bank, Shaukat Aziz, said that the problem of giving more votes to developing nations was complex, and related to the ability of developing nations to influence the design and contents of the international development agenda, international finance and donors activities.

In this meeting, Wolfensohn stated that the failure of developing and developed nations to come to an agreement in respect of subsidies and agricultural protection in trade at the WTO conference in Cancun, September 2003, was a reminder that equality of strength or voice was needed. This failure was of great regret because world growth could only be attained through trade liberalization. Developing nations were not in agreement with the withdrawal of agricultural subsidies because it was clear that developed countries were still practicing agricultural subsidies. The World Bank observed that developed countries allocated US$ 56 trillion to developing countries, but spent US$ 300 trillion on agricultural subsidies and US$ 600 trillion on defence.

NGO Comments
Demba Moussa Dembele, from the Forum for African Alternatives (Dakar, Senegal) stated that the World Bank had already forced poor countries to open up to investment and trade from the North and had asked them to have faith in the global market. Did the World Bank realize that this market was distorted as a result of subsidies and trade obstacles that were created and imposed by the Northern states? It shouldn't only be poor countries that change their policies, but Northern countries should be accountable for "misleading poor countries down the path of rigged prices and poverty".

In addition, the NGOs also questioned the NGO accreditation process for attending the meetings. They also raised the issue of representation in the decision making process within the IMF and the World Bank that is not balanced between the rich and powerful and the poor and weak nations.

Sources:
www.worldbank.org/
www.imf.org
www.investorindonesia.com/

The results of the meeting may be viewed at:
www.ifiwatchnet.org
www.brettonwoodsproject.org
news.bbc.co.uk/1/hi/business/3136176.stm

(also the IGJ) www.globaljust.org

Contacts in Dubai:
Gerry Rice +971-50 559-7489
grice@worldbank.org
Andrew Kircher +971-50 559-7253
akircher@worldbank.org

Region II Poverty Reduction Strategy Conference

This conference aimed to re-examine and exchange experiences of poverty reduction strategies in East Asian countries, to identify the obstacles and challenges in the planning and implementation of these strategies as well as draft "lessons" that may help formulate a vision for the future.

The previous month, on 17-18 September 2003, the Region II Gender and Poverty Reduction Strategy Workshop was also held in Cambodia. This workshop was an opportunity to exchange experience and advocate on gender issues in relation to Poverty Reduction Strategy Papers (PRSPs) that are currently being drafted by each country. The PRSPs themselves are part of the efforts being made to attain the Millennium Development Goals, one of which is to reduce poverty by half by 2015. In this workshop, Indonesian NGOs were represented by the Association for Supporting Small-Scale Women's Business (ASPPUK), the Institute for the Development of Agricultural Technology (LPTP) and the Business Partners Foundation (YMU). These NGO representatives submitted the Indonesian People's Anti Impoverishment Movement (GAPRI) position paper that calls for a change in the role and position of all parties, including donor institutions in addressing structural poverty issues in Indonesia.

Sources:
lnweb18.worldbank.org/eap
For further information about PRSP and GAPRI (the Indonesian People's Anti Impoverishment Movement), contact:
Fakhrul Syah Mega, jari@indo.net.id, www.jari.or.id
Titik Hartini titik_har@hotmail.com or asppuk@indo.net.id

Reports from the workshop process may be seen at:
www.unifem-ecogov-apas.org/
Documentation of the Gender and PRSP workshop material may be seen at: www.unifem-ecogov-apas.org/ecogov-apas/EEGnews/newsitems.htm