The Jakarta Post, Friday, May 09, 2003 – OPINION & EDITORIAL
Rethinking development - pain or gain? (Part 2 of 2)
,Director, The Business Watch Indonesia, Surakarta,firstname.lastname@example.org A second lesson is that development must be sustainable and environmentally sound. If economicdevelopment destroys the earth's natural resource base in the process, it is self-defeating. But, this iswhat is happening.The soil is being depleted, with nearly two million hectares of land worldwide eroded and some areasfacing sharp losses in productivity. One-fifth of all tropical forests have been cleared, reaching a totalloss of nearly 200 million hectares between 1980 and 1995.One-third of all terrestrial biodiversity, accounting for 1.4 percent of the earth's surface, are invulnerable hot spots and threatened with complete loss in the event of natural disasters or furtherhuman encroachment.Fifty-eight percent of the world's coral reefs and 34 percent of fish species are at risk from humanactivities, 70 percent of the world's commercial fisheries are fully exploited or overexploited andexperiencing declining yield, the World Bank found.These calamities are happening because economic solutions are considered as the only way out forvarious problems affecting humankind. While it is true that there exists some or many successfuleconomic approaches, it does not legitimate application in all other cases -- such as debt.Since the economic crisis struck in 1997, the rupiah devalued by an actual 400 percent, making itimpossible for the country to pay its debt. The debt has therefore been rescheduled through thegroups of donors in the Paris Club and London Club.Yet, one condition for rescheduling applies. It is the Letter of Intent (LoI) with the InternationalMonetary Fund (IMF), which is also a precondition in getting support from other financial institutionslike the Consultative Group on Indonesia (CGI), the Asian Development Bank and the World Bank.Indonesia was thus registered for treatment with the International Development Association, with theobligation to follow IMF's prescription.Together with the World Bank, the IMF embarked on a policy to structurally adjust the Third World bydeflating economies and demanding a withdrawal of government, not only from public enterprise butalso from compassionate support of the basic health and welfare of the most vulnerable. Exports toearn foreign exchange were privileged over basic necessities, food production and other goods fordomestic use.In 1986, the IMF set up its first formal Structural Adjustment Facility, which was followed by the WorldBank in 1989 with contracted adjustment loans to 75 percent of the countries that already had similarIMF loans in place.The bank's conditions both extended and reinforced the IMF prescription for financial liberalization andopen markets. They included privatizing state-owned enterprises, massive public sector layoffs, cuttingbasic social services and subsidies on basic foodstuffs, and reducing trade barriers.In Indonesia, one of the policies imposed by the IMF is a bailout for banks' debt, which transformsprivate debt into public debt under the responsibility of the government, which has to issue obligationletters.