PROFILES OF INDONESIA’S

FOREIGN DEBTS

Working Paper # 6, 2007

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Since 1966/1967 Indonesia has received foreign aid (loans and grants) from twenty
countries and thirteen multilateral agencies. Most of these countries and multilateral
agencies were engaged in one group called Inter-Governmental Group on Indonesia
(IGGI) from 1967 to 1991, and then replaced by Consultative Group on Indonesia (CGI)
from 1992 to 2007. IGGI was chaired by the Netherlands, and CGI was chaired by the
World Bank. Since 2005 CGI was officially chaired by Indonesia but in practice it was
chaired and directed by the World Bank.1

Among the multilateral agencies, World Bank and Asian Development Bank (ADB) are
the two major donors/creditors, and among the bilateral donors, Japan is the biggest
accounting for about 70% of the total aid. IMF was not a member of IGGI or CGI, but it
was always represented in the meetings of IGGI/CGI. It is interesting that although IMF
is not included as donor; its presence in Indonesia has brought strong implications for the
country and for the donors. The bilateral donors and the multilateral donors refer to IMF
before making loans agreements with Indonesia.2

Compositions of Foreign Aid to Indonesia

From the compositions, the bilateral sources take the biggest portions of the debts, where
official development assistance is the largest. The official development assistance (ODA)
is in general a loan, both concessional and commercial, and some parts are in grants.
Multilateral development assistance is mostly in the form of technical assistance, which
is loan, and some small portions are grants.

Foreign aid supports both project and program. Project aid is used to support physical and
institutional infrastructure. Bilateral aid mainly supports the projects, and less aid goes to
program. Aid from multilateral agencies is more focused on program, with smaller
portion on project. This is in line with the policies of the multilateral institutions
particularly the World Bank and IMF that attach the aid with policy conditionalities, such
as policy reforms. Program aid is drawn when Indonesia is in critical situation, whether
due to fiscal problems or the balance of payments problem. The program aid is aimed at
supporting the balance of payments and the state budget. In return Indonesia has to take
policy measures that are attached to the aid requirements.

Though the program aid is relatively smaller than the project aid in numbers, the impacts
of program aid to Indonesian economic and political system are significant. Structural
adjustment programs are conditionalities attached to the program aid package from IMF
and the World Bank, that until bring huge impacts on the social and economic livelihood
of the majority of the poor population in Indonesia. The liberalization and privatization of
state owned companies and the public services that influence the state revenues and the

1
Kwik’s paper. Kwik Kian Gie was the Coordinating Minister of Economic Affairs (2000 – 2003) and
Minister of National Planning (BAPPENAS) in 2003 – 2004. Paper prepared by Kwik Kian Gie to be
presented in the CGI Meeting in 2002 was “edited” by the World Bank. Kwik complained that the contents
of the paper was changed and did not reflect his view and the GOI’s but the World Bank’s.
2
Bappenas study, 2004.

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costs paid by the poor for the services are among the general conditionalities of the IMF
and the World Bank. With the program aid, the World Bank staff can freely influence the
policies of the Central Government of Indonesia and work as if they are parts of the
Indonesian bureaucracy. Indonesian bureaucracy becomes so open to the World Bank
that none of the policies are confidential to non-residence.3

World Bank provided assistance from International Development Association (IDA) and
other facilities for low income countries only when Indonesia was in economic crisis. In
1998, when Indonesia was hit by the crisis, the World Bank approved the IDA credit of
US$ 26.5 to Indonesia to prevent the excess of the effects of the crisis. In other figures,
shown later below, there is an increasing portion of foreign aid allocated to social welfare
(social safety net, health and education) after the crisis, which never happened before.
This is mainly supported by the IDA credit. But the soft loans from IDA (a member of
the World Bank group) have to be paid in high price by the poor Indonesian. The
conditionalities attached to the soft loans included that Indonesia has to implement
privatization and liberalization, including privatization of public services such as health
and education sectors, as stipulated in the Letter of Intent between Indonesia and IMF.
Program loans are not visible, but the policy impacts are phenomenal. Program loans are
in general tied to certain conditionalities designed by the Bretton Woods Institutions to be
implemented by Indonesian government.

The tables and figures below show the growth of foreign debts of Indonesia from various
years.

Bilateral Debts:

The biggest bilateral donor for Indonesia is Japan, followed by US, France, Germany,
Austria and Netherlands. The loans from these six countries are mainly for project loans.

3
A documentary video presented during the farewell party of the Country Director of the World Bank,
Andrew Steer, in March 2007, described clearly how the World Bank has been integrated in the Indonesian
Economic Team (the Coordinating Ministry of Economic Affairs, Ministry of Finance, Ministry of Trade
and the Ministry of National Planning). The documentary video could trigger the question of the
independence of the Indonesian economic team, and to certain extent, the question whether Indonesia is
still sovereign in making its economic policies.

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Table 3.1. Bilateral Loans, 6 top countries (million US$)

Countries 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Japan 13,360.00 15,775.00 19,456.00 18,144.00 16,269.00 18,902.00 21,646.16 22,060.69 20,137.80 20,347.58

Germany 1,025.00 1,099.00 930.00 861.00 911.00 1,083.00 1,384.15 1,425.00 1,351.41 1,433.44

US 1,477.00 1,445.00 1,485.00 1,546.00 1,547.00 1,584.00 1,603.71 1,521.46 1,573.18 1,470.15

Austria 211.00 273.00 763.00 803.00 796.00 864.00 1,012.87 1,048.90 871.33 914.39

France 1,560.00 1,656.00 1,465.00 1,227.00 1,142.00 1,377.00 1,656.53 1,697.79 1,494.62 1,557.99

Netherlands 792.00 787.00 711.00 727.00 667.00 791.00 956.50 969.48 872.91 890.05

Sub Total 18,425.00 21,035.00 24,810.00 23,308.00 21,332.00 24,601.00 28,259.92 28,723.32 26,301.25 26,613.60
Other
Countries 1,092.00 1,339.00 1,348.00 1,338.00 1,386.00 1,473.00 1,623.05 1,615.63 1,494.10 1,493.35

Total 19,517.00 22,374.00 26,158.00 24,646.00 22,718.00 26,074.00 29,882.97 30,338.95 27,795.35 28,106.95

Figure 3.1. Bilateral loans, 6 top countries (%)

100%

80%
Other Countries
Netherlands
60% France
Austria
40% US
Germany
20% Japan

0%
1997 1999 2001 2003 2005

According to the Report on the Registration Number of Foreign Loans and Grants,
Directorate General of Treasury, Ministry of Finance, as of 31 March 2007, Japan and
Indonesia have signed 926 loans agreements in the period of 1965 to March 2007. USA
and Indonesia have 352 loans agreements in the same period; Federal Republic of
Germany had 417 loans agreements in the same period. France had 695 loans agreements
with Indonesia; Netherlands had 204 loans agreements with Indonesia; and Austria had

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77 agreements in the period of 1975 up to 2007. Australia has 58 loans agreements with
Indonesia since 1977 up to July 2007.

These agreements include for ODA and commercial loans. From the interest rates, Japan
loans in average are relatively lower than the loans from other countries, ranging from
0.60% to 9% per annum; Austria ranging from 3.0% to 10.50%, except for two credit
export facilities which use Austrian market rate of 0.60%; the interest rates of loans from
USA range from 0.40% up to 12.00%. Netherlands: 0.50% - 12.87; Germany: 0.60% -
12.00%.

There are four countries (Germany, Austria, Netherlands and Japan) that have quite big
number of tied loans. The tied loans are spent for capital goods, military and other
security equipment and consultancy. The table 3.6 below shows that between 80% and
92% of the funds of the tied loans are spent in the creditor countries. The tied loans raise
its own problem of who is responsible for its quality, benefit and the sustainability. The
cases from German warships and Japan-funded dams particularly look at these tied loans.
The tied loans from the World Bank and ADB have raised particular questions of for
whom the loans are, for the interest of the World Bank and the ADB and their staff
members, or for the interests of Indonesia.

Multilateral Debts:

World Bank and Asian Development Bank (ADB) are the two major multilateral donors
for Indonesia. IMF is to certain extent is included in this category, although IMF’s loans
cannot actually be categorized as loans since the funds were deposited in the Central
Bank to secure the foreign exchange reserve of the Central Bank.

The fund from IMF was actually useless, since it was deposited in the Central Bank at the
time when the Central Bank itself has enough reserves. Until the end of the lending
period, the funds from IMF were not used at all but Indonesia has to repay the funds with
its interests.

The most controversial debate about the funds from IMF is about the conditionalities
imposed by IMF to Indonesia through the Letter of Intent and other memorandum of
understanding on economic policies that should be implemented by Indonesia. Since
1997 up to 2005 there were 20 letters of intent that were signed by IMF and Indonesia on
policy measures and other conditionalities that should be implemented by Indonesia.

The fund from IMF deposited in the Central Bank was in fact a Trojan horse for
Indonesia. With the presence of the funds, counted as loans, the IMF could freely control
the policies of Indonesia in order to be in line with the neoliberal policies imposed and
preferred by the developed countries and the multinational corporations whose interests
are represented in IMF.

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Below is the table and figure that show the amount of debts and its percentage to the
multilateral donors, including IMF.

Figure 3.2. Multilateral Loans (%)

100%
MIGA
80% EID
IMF
60% IFAD
NIB
40%
IDB
IBRD
20%
IDA
ADB
0%
1997 1999 2001 2003 2005

The loans from ADB increase steadily by year, and in 2006 ADB became the biggest
multilateral donor for Indonesia. IDA constitutes small portion but increased in 2006. The
second biggest multilateral donor is World Bank followed by IMF for the period of 1997
– 2005. In November 2006 Indonesia paid back all the funds from IMF. IDB (Islamic
Development Bank) shows increasing interest in providing loans to Indonesia although it
is still in small proportion. Debts to foreign private sector include also the government
obligations or bonds purchased by the non-residents.

Table 3.2. Multilateral Sources of Loans (Million US$)

Donor 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

ADB 4,557.00 5,694.00 7,517.00 7,544.00 7,179.00 8,310.00 8,582.15 8,869.14 9,140.13 9,409.21

IDA 720.00 702.00 682.00 719.00 726.00 788.00 884.39 949.06 1,002.59 1,321.75

IBRD 10,307.00 10,229.00 11,494.00 11,774.00 11,577.00 10,802.00 9,776.10 8,942.99 8,106.53 7,420.81

IDB 27.00 32.00 51.00 215.00 184.00 138.00 151.47 162.58 202.85 396.70

NIB - 217.00 214.00 200.00 186.00 170.00 155.00 139.16 120.91 105.46

IFAD 57.00 84.00 72.00 65.00 57.00 65.00 78.71 78.98 71.06 73.72

IMF 2,973.00 9,082.00 10,255.00 10,983.00 9,105.00 8,829.00 10,238.61 9,653.89 7,806.03 -

EID 4.00 8.00 8.00 8.00 7.00 7.00 110.77 109.12 116.14 109.09

MIGA - - - - 8.00 3.00 - - - -

TOTAL 18,645.00 26,048.00 30,293.00 31,508.00 29,029.00 29,112.00 29,977.20 28,904.92 26,566.24 18,836.74

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World Bank had become the member of the Inter-Governmental Group on Indonesia
(IGGI) since its inception in 1967, and has been active in coordinating the donors for
Indonesia since 1966, and became the chair (co-chair with Indonesia since 2005) of CGI
until its termination in 2007. But aid from the World Bank group was started in 1968
through IDA soft loans. The IBRD (which is publicly known as the World Bank) itself
started its first loan in 1974 when Indonesia has started to catch up with the momentum
of development period. It was the time when World Bank started to involve in supporting
physical projects and supporting technical assistance group working in the National
Planning Board and the Ministry of Finance.

Though there are controversial projects and programs supported by the World Bank
(Kedung Ombo Dam, and the policy reform program), the World Bank is successful in
maintaining its image as a donor organization. When Indonesia was burdened with
structural adjustment program in 1980s and the implementation of the policy
conditionalities (privatization and liberalization) after the 1997/98 crisis, World Bank
could wash itself from being responsible for the failure of the policy reforms, where IMF
was the only institution to be publicly blamed. In fact it is the World Bank that
orchestrates the implementation of the IMF policy conditionalities.

There are two kinds of projects supported by the World Bank that should be paid special
attention. First, some of the physical projects supported by the World Bank that were
supposed to be public services of the government, such as water supply, irrigation,
fertilizers, electricity now become objects of privatization as parts of conditionalities of
the new World Bank loans after the Structural Adjustment Program and the 1997/1998
crisis. The crisis, while still becoming the worst memory for the majority of Indonesians,
has been used as the appropriate moment for the World Bank to impose liberalization and
privatization including the cut of subsidies in social sectors. The interesting case is that
while on one hand IBRD (World Bank) pushes the government to privatize the state-
owned companies and the public services, on the other hand IFC (a family member of the
World Ban) is making fortune of buying the cheap shares of the public services and the
privatized companies.

The second, after increasing critiques of the relevance of the World Bank in Indonesia,
the World Bank has found its new project icon called Community Driven Development,
which consists of two project components: Kecamatan Development Project (KDP) for
rural areas and Urban Empowerment Project for urban areas. The World Bank is now
enthusiastically promoting this project as bait for new loans for Indonesia. All staff
members of the World Bank see this KDP project as a new image of the World Bank that
brings it to its main mission of alleviating poverty.

Scott Guggenheim’s paper on KDP has been treated by the World Bank staff in Indonesia
as the main reference of the success story of the Project4. The paper is started with a story

4
Scott Guggenheim, “Crises and Contradictions: Understanding the Origins of a Community Development
Project in Indonesia”, paper 2003 downloaded from www.worldbank.org. The Project was started with a
local-level institutions study (LLI), which came out with rhetorical conclusions that re-justify the

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about a community meeting in Central Sulawesi, a province which has no record of
poverty in its history; the story that has been common among the development tourists.
Indonesian bureaucrats in fact have the same story when they come back to their offices
after visiting remote rural communities. The difference is that the bureaucrats keep and
tell the story for their amusement, while the World Bank staff use the story for a proposal
for new loans for Indonesia. Like in other parts of the world, the project in fact put the
poor people to be responsible for the poverty alleviation, in terms that the poor
themselves will repay the debts in the future.

Types of Loans:

While from bilateral donors, the aid can be in the form of concessional loans (or soft
loans) and commercial loans, the loans from the multilateral donors are mainly soft loans.
There are also private sources of loans, which provide commercial loans on market-based
interest rate. These loans are in the form of credit export facilities. These forms of loans
are drawn to support the purchase of high technology equipments and weapons for the
defense purposes. Indonesia also draws loans in the forms of leasing of equipments
provided by foreign donors and foreign private companies. Bilateral sources are the
major loans followed by multilateral. Export Credit facility has to be paid special
attention, since the use of the loans is mainly for defense which has no economic return;
the repayment will be totally from the tax revenues of the state.

Table 3.3. Foreign Debts based on the types of Loans, 2000 - 2006 (US$ billion)

Sources 2000 2001 2002 2003 2004 2005 2006 (Q3)

Bilateral 24.60 22.70 26.10 29.90 30.30 27.80 27.80

Multilateral 20.50 19.90 20.30 19.70 19.30 18.80 17.70

Export Credit
Facility 15.70 14.90 16.60 18.40 18.00 16.10 15.90

Leasing 0.60 0.40 0.40 0.30 0.20 0.10 0.10

Commercial 0.10 0.10 0.10 0.10 0.10 0.10 0.10

BI Certificate 0.20 0.20 0.20 0.20 0.20 0.20 -

Total 61.70 58.20 63.70 68.60 68.10 63.10 61.60

intervention of the World Bank in Indonesia’s development which in fact – as the study from BAPPENAS
revealed – is only to secure the jobs of the World Bank staff in Indonesia.

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Figure 3.3. Loans, types of loans (%)

100%

80%
BI Certificate
60% Commercial
Leasing
40%
Credit Export Facility
Multilateral
20%
Bilateral
0%
2000 2002 2004 2006
(Q3)

Debts based on Conditions:

The foreign debts can be grouped in commercial and non-commercial debts. The
commercial debts are from private sources, including the bond holding by non-residence,
and the non-commercial debts are both from ODA and non-ODA. Including in the non-
ODA are from multilateral sources.

Table 3.4. Foreign Debts based on its types, 1998 - 2006 (Million US$)

Types 1998 1999 2000 2001 2002 2003 2004 2005 2006
Commercial
1) 2,388 2,530 2,420 43,004 2,501 3,106 5,234.16 9,440.10 13,875.33
Non-
Commercial 64,941 73,332 72,496 67,074 72,160 78,559 77,491 70,632 61,952

a. ODA 48,422 56,451 56,154 51,747 55,186 59,860 59,243.60 54,361.57 46,943.24

b. Non-ODA 16,519 16,881 16,342 15,327 16,974 18,699 18,247.36 16,270.30 15,008.37

Total 67,329 75,862 74,916 110,078 74,661 81,665 82,725 80,072 75,827

1) Including the obligations and bonds held by non-residents.

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Figure 3.4. Foreign Debts based on its terms (%)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006

Commercial Non-Commercial ODA Non-ODA

The figure shows that in 2001, the commercial loan was quite high. This was due to the
purchase of new equipment for defense purposes. The foreign aid is predominantly non-
commercial and from the non-commercial aid, the ODA components are dominant.

The Japan Bank for International Cooperation (JBIC) provides both for ODA loans and
for export credit. This is quite tricky, although the management is separated, but in fact
the loans from JBIC – whether for ODA and commercial – are to certain extent
overlapping. The loans for toll road constructions are in non-commercial terms, but the
machineries for toll roads are in commercial loans.

Debts based on the currency:

Most of Indonesia’s foreign debts are in US dollars; in 2006 the foreign debts in US
dollar accounted for 49.66% of the total debts. This is followed by Japan Yen, which in
2006 accounted for 31.52% of the total debts. The increasing percentage of Euro since
2000 that put Euro in the third place is mainly due to the debt rescheduling through Paris
Club mechanisms, where the loans that were signed using each of European country
currencies were converted to EURO after the unification of the European currency.

Before the crisis in 1997/1998 the bilateral loans were predominant, but after the crisis it
slightly shifted to multilateral loans. The shift brought its own consequences, namely that
Indonesia becomes more dependent on US dollar since the multilateral debts are booked
in US dollar. The needs for US dollar for the repayment of foreign debts will increase.
This is indicated by the fact that in 1998 the Indonesian DSR reached 57.90%. This

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means that the impact of the depreciation of Indonesian Rupiah to dollar will be higher
than the increase in Indonesian exports.

Table 3.5. Foreign Debts, based on the Currency (US$ Million)

Currency 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
DEM 2,653.00 3,104.00 2,425.00 2,018.00 - - - - - -
EUR - - - 1,521.00 7,027.00 8,624.00 10,560.00 10,850.7 9,570.3 10,188.3
FRF 1,847.00 2,046.00 1,752.00 1,303.00 - - - - - -
GBP 1,022.00 1,048.00 1,206.00 1,154.00 1,158.00 1,312.00 1,447.44 1,444.5 1,295.2 1,370.2
JPY 18,581 22,251 27,428 25,038 22,162 24,981.00 28,283.51 31,312.0 24,933.7 23,898.5
SDR 3,035 9,187 10,352 11,134 9,283 9,105.00 10,655.96 9,758.0 9,098.2 1,753.2
USD 1) 23,066 25,342 28,570 29,530 30,939 29,127.00 29,654.84 28,217.2 34,226.2 37,649.6
Others 3,642 4,351 4,129 3,218 809 1,511.00 1,064.42 1,142.9 948.4 949.2
Total 67,329 67,329 75,862 74,916 71,378 74,660.00 80,855.00 82,725.2 80,072.0 75,808.9
1) Including the obligations held by the non-residents

From bilateral sources, Indonesian debts are dominated by loans from Japan. In 2004 the
portion of Indonesian debts to Japan reached up to 74% of the total of bilateral loans.
Japan is followed by US, France, Germany, Austria and Netherlands. This also means
that Indonesian debt to Yen is also high. The economic turbulence in Japan will also
influence the stability of Indonesian economy. This indicates that Indonesian economy
depends on external factors, particularly on Japan and US economy rather than its own
domestic economic fundamentals.

Figure 3.5. Foreign Loans based on currencies (%)

100%

Others
80%
USD 1)
60% SDR
JPY
40% GBP
FRF
20% EUR
DEM
0%
1997 1999 2001 2003 2005

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Besides the problem of dependence to US dollar and Japan Yen that might create
vulnerability to Indonesian Rupiah, Indonesia also faces the aid conditionalities. Up to
2003 Indonesia’s foreign debts were dominated by ODA (Official Development
Assistance) that are categorized as soft loans (73.59%) and non-ODA (semi-soft) of
22.64% and commercial loans of 3.77%. Although ODA loans are soft loans, the loans
are mainly tied loans. The government of Indonesia has to make policies that favor the
interests of the creditors. The program and project schemes have to be adjusted to the
program schemes of the creditors. Indonesia cannot freely decide what the programs and
projects that are supported by foreign loans. This is mainly caused by the fact that each
creditor has its own system and preferences. For instance the loans from Japan are mainly
for infrastructures.

Tied Aid

Foreign aid is not only to fulfill the needs of the recipient country (the debtor, i.e.
Indonesia), but also for the interests of the creditors. This is indicated from the utilization
of the foreign aid. BAPPENAS estimates that almost 75% of aid goes back to the donors
in various forms such as the purchases of goods and services. Certain creditors require
the purchases of goods from the countries, and the use of skilled labor or consultants
from the donors. The following table shows that more than 80% of the aid from bilateral
donors goes back to the countries, while 60% of the loans from ADB are absorbed by
ADB itself. This indicates that the loans are more for the benefits of the donors rather
than for the recipients. Regarding the multilateral donors, the BAPPENAS other study5
seems to be proved, that the loans are more for project-seeking of the staff of the donor
institutions for their own job security while victimizing the poor Indonesians. The more
the loans approved for Indonesia by the multilateral donors, the more secured the job of
the staff of the agencies, since more loans means more overhead costs.

Tables 3.6. Tied loans

Creditors Foreign Utilization (%) Local Utilization (%)

Germany 97.31 2.69
Austria 92.81 7.19
Denmark 90.55 9.45
Netherlands 87.42 12.58
South Korea 82.88 17.12
JBIC 80.45 19.55
ADB 61.93 38.07
World Bank 35.04 64.96

Regarding the project loans, where the main contractors, consultants and the supplies are
from the creditor countries, the question is who is responsible if the project fails or if the
project brings harms to the local communities and environment? This is related to the

5
BAPPENAS, op.cit., 2004.

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unfairness in the foreign loans businesses in terms that recipient countries pay the
contractors, the consultants and purchase the supplies from the creditor countries using
the loans from the creditor countries. The real case is that whether the project is
successful and useful or not for the people in the recipient countries, it is not the
responsibility of the creditors.

In the case of projects funded by loans from Japan, the new debts are always booked for
repairing the faulty works of the Japanese contractors and consultants, or in overcoming
the problems coming out as the effects of the works of the Japanese contractors and
consultants. In many cases it is dilemmatic for the recipient country, i.e. Indonesia. If
Indonesia rejects the new loans, the project cannot be continued or the project will not
operate and Indonesia would pay the previous debts without any result for the country.

In the case studies of the three Dams in chapter 2.D. Japan slowly but steadily poured
new loans over the previous loans to Indonesia. Besides the projects are delayed that
increased costs, there are also negative impacts that were not anticipated in the feasibility
study and the project design. The impacts caused other new loans, which then make
Indonesia as a free milking cow for Japan.

The Terms of Foreign Loans:

The table 3.7 below shows the terms of foreign aid to Indonesia from 1970 to 1999: the
terms of interest, the maturity and the grace period. The terms of maturity of the loans
can be used to predict the accumulated points when Indonesia has to pay the principals
and the interests in critical amounts. The interest rates of the loans were steadily
increasing. Between 1970 and 1997, the average interest rate was more than doubled, and
the maturity years and the grace period nearly halved. The grant element in 1997 was
only 22.7%, while in 1970 it was 60%. In one hand this reflects that Indonesia is moving
away from the group of poor countries to emerging economy, but in the other hand it may
also means that Indonesia was in desperate need, without considering the terms, for
foreign loans for implementing the liberalization that started in the middle of 1980s. The
more dependent Indonesia to foreign creditors, the weaker its terms of bargaining in aid
negotiations become.

Table 3.7: Average Terms of Aid, 1970-1999

Year 1970 1980 1990 1995 1997 1999

Terms of interest 2.4 5.4 5.6 5.1 6.3 3.8
(%)
Maturity (years) 35.9 25.5 23.1 21.3 19.5 16.7
Grace Period (years) 9.5 7.3 6.6 5.8 4.9 5.1
Grant element (%) 62.9 36.2 32.8 33.3 22.7 38.1

Source: World Bank (2001), Global Development Finance

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Program Loans and Multilateral Loans:

Multilateral loans are more for program loans rather than for project loans. The program
loans are more related to policy reforms and conditionalities made by the World Bank
and IMF. Program aid reaches its peak during crisis period, when the multilateral donors
come with their rescue package. The program loans from the multilateral agencies are
primarily used for securing balance of payments and budgetary supports. Some bilateral
donors also provide program support to support program aid package from the
multilateral donors, and they are orchestrated by the World Bank or IMF, as indicated by
the “rescue package” below.

The rescue package itself in fact did not rescue the economy of Indonesia. It was utilized
as instruments for IMF and World Bank to impose conditionalities to Indonesia in order
that Indonesia adopts all policy prescriptions of “Washington Consensus”.

In 1971 the program aid was 2.5% of GDP compared to only 0.5% of GDP allocated for
project aid. The oil boom in 1974 that contributed to increasing state revenues, and
Indonesian economy was steadily stable, shifted the program aid to lower percentage. For
more than ten years (1974 – 1985) program aid was not significant to Indonesia. The
sharp decline in the world oil price in 1982 that caused the crisis in the balance of
payment, the program aid came in again through the IMF/World Bank structural
adjustment loans. In 1983 IMF approved SDR260 million under Compensatory
Financing Facility (CFF). Indonesia received SDR463 million from IMF in 1987 under
the CFF to compensate for the decline in exports. In the same year, Indonesia obtained
$300 million from the World Bank under the Trade Adjustment Program Loan.6

Program loans were meant to rescue the country from crisis, particularly related to the
crisis in balance of payment and state budget. Therefore program loans are mainly
characterized by quick disbursing. The program loans provided following the crisis in
1997/1998 have different characteristics with the commonly known as program loans.
Compared with no conditionality in the case of the World Bank Trade Adjustment Loans
in 1987, after the 1997/1998 crisis all program loans are tied to a long list of
conditionalities. The program loans during the crisis period with the conditionalities as
detailed in the Letters of Intent (LoIs) were used as reference by both the multilateral
donors and the bilateral donors.7 The disbursements of loans from multilateral donors and
bilateral donors (both for program and project loans) were determined by whether the
government of Indonesia has implemented the conditionalities or not. The unity of the
donors was made possible because of the presence of regular meetings of CGI where the

6
Anis Chowdhury and Iman Sugema, “How Significant and Effective has Foreign Aid to Indonesia been?”,
Center for International Economic Studies (CIES) Discussion Paper, No. 0505, University of Adelaide,
Australia, 2005, p. 15.
7
In 1998, the Fund postponed loan disbursement three times: March, May and November. This
automatically affected the disbursement of loans from the WB, ADB and some bilateral lenders.

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government of Indonesia had to provide regular reports to the donors, besides regular
reports to and regular monitoring from IMF.

Table 3.8a. The IMF Stabilization Loans to Indonesia

Program Type Date of Expiry Amount Amount Drawn

Approval Approved (Disbursement
ratio%)
Stand-by March 1972 1973 US$ 14 million
CFF August SDR 360
1983 million
CFF May 7, SDR 463
1987 million
Stand-by November August 25, SDR 34 billion SDR 3.67 billion
5, 1997 1998 (44.0%)
EFF August 25, February 4, SDR 5.38 SDR 3.79 billion
1998 2000 billion (70.6%)
EFF February 4, December 31, SDR 3.64 SDR 1.99 billion
2000 2003 billion (54.6%)
Source: IMF website (www.imf.org).

Table 3.8b: The World Bank Adjustment Loans to Indonesia

Type Date of Approval Amount Approved

Trade Policy Adjustment 1987 US$ 300 million
Policy Reform Support 1999 US$ 1.5 billion
Social Safety Net Adjustment 1999 US$ 600 million
Water Resources Sector 1999 US$ 300 million
Adjustment
Source: BAPPENAS, 2001

The IMF Support Facility and the Deepening of the Crisis

The loans from IMF, or better called IMF’s funds deposited in Indonesia’s Central Bank,
was the most controversial one in Indonesia’s economic and political history. The funds
were never used by Indonesia but Indonesia had to repay the principals and the interests.
Attached to the funds were a long list of conditionalities detailed in the Letter of Intent
(LoI) and Memoranda of Economic Policy Monitoring. The funds and conditionalities
also determined Indonesian position in loans negotiations with other creditors/donors.
Although IMF was not a member of CGI, all participants in CGI had the same voice to
put pressure on Indonesia to implement IMF’s policy prescriptions and conditionalities.

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CGI Meetings were also used to check how far Indonesia had implemented the policy
prescriptions from IMF.

On 5 November 1997, Indonesia and IMF signed a three-year stand-by arrangement

(SBA). IMF approved SDR 34 billion and committed to disburse emergency loans of
SDR 8.3 billion, but in fact IMF only disbursed (or properly said, deposited in the Central
Bank) SDR 3.7 billion. The SBA was aimed at restoring market confidence, orderly
adjustment of the current account, containing the unavoidable decline in growth and the
inflationary pressure of exchange rate depreciation. The fiscal austerity and tight
monetary policy were the key measures to achieve the objectives.

The measures taken did not bring any positive results. The economy deteriorated and the
banking crisis started to cause social unrests and uncertainty in the whole economic
activities. The fiscal austerity, tight monetary policy, floating exchange rate regime and
the bank closure as the prescription from the IMF brought the economy into deeper crisis.
To solve the deepening crisis, IMF and Indonesian authorities signed the first Extended
Fund Facility (EFF). EFF indicated that the crisis would not end in short-term period. The
first EFF with the commitment of SDR 5.3 billion was expected to end in February 2000.
The program imposed stricter structural measures on fiscal and monetary policies as well
as banking and corporate restructuring.

The crisis seemed to be still faraway from recovery. This was added by the riots and
political crisis. While the People’s Assembly Council (Majelis Permusyawaratan Rakyat
– MPR)8 decided the general guidelines for the government to solve the crisis without
dependence to foreign creditors, the government on the other hand could not avoid the
pressures from IMF and the donors’ community. In February 2000, when the first EFF
expired, the government signed the second EFF involving a commitment of SDR 3.6
billion from IMF. The second EFF was accompanied by a long list of conditionalities,
including stricter measures on privatization and legal reforms. Ironically, when Indonesia
was in deep crisis the disbursement of foreign loans from the creditors declined.

Rizal Ramli, the then Coordinating Minister of Economic Affairs, in 1997 had warned
that “involving the IMF in Indonesia’s recovery program would inevitably plunge the
country into a deeper economic crisis”9. Ramli described IMF’s role in Indonesia into
three stages that brought Indonesia into deep crisis and the people into misery and
destitutions. Following the Stand-by Arrangement (SBA), the inter-bank interest rate sky-
rocketed from 20 to 300 percent from the third quarter of 1997 that in turn caused
banking crisis. The IMF in November 1997 recommended the closure of 16 banks that
caused capital outflow of US$ 5 billion and further pressure on Indonesian Rupiah that in
turn caused corporate bankruptcy and loss of thousands of jobs.

Then IMF recommended the conversion of private debts into public debts. The
government’s domestic debts increased up to US$ 65 billion. At the same time

8
MPR is like a Congress in US democratic system, consisting of the House of Representatives and the
Senate.
9
Dr. Rizal Ramli, “The IMF’s Indonesuan Myths”, mimeo, 2004.

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Indonesia’s public foreign debts increased from US$ 54 billion to US$ 74 billion, and the
international private debts decreased from US$ 82 billion to US$ 67 billion, some of
which have been converted as foreign public debts. As a consequence of the financial
crisis and IMF policies, Indonesia’s debt has doubled over a period of just four years.

Furthermore, Ramli exposed that IMF policies put unsustainable pressure on the
government budget. For the 2002 fiscal year, debt servicing is estimated to total US$13
billion (IDR 130 trillion) including domestic and international payments. These payments
amount to more than three times the total public sector wage bill including the military,
and eight times the education budget. In short, IMF policies have created a debt trap
from which there is no escape. The IMF has forced Indonesia to accept its misdiagnosis
and failed prescriptions, including the transfer of private debt to the public sector.10

The loans from IMF until now become sources of confusion among the public in
Indonesia. The funds were supposed to be a “bail out” package to support the recovery of
the crisis, and could be expended. The commitments of the “bail out” package from IMF
was followed by the same commitments from other creditors such as the World Bank, the
ADB, Singapore, the USA, Japan, Australia, China, Hong Kong, and Malaysia. The
financial scheme totaled to USD 43 billion and grouped into two lines: USD 23 billion in
the first line and USD 20 billion in the second line (Table 3.7). The second line help
would be issued only after the first line was fully exhausted. In reality, the second line
was never been utilized.11

Table 3.7: International Financial Rescue Package for Indonesia

Contributors Amount (US$ Billions)

First Line 23.0
IMF 10.0
World Bank 4.5
Asian Development Bank 3.5
Government of Indonesia 5.0
Second Line 20.0
Singapore 5.0
United States of America 3.0
Japan 5.0
Australia 2.0
China 3.0
Malaysia 1.0
Hong Kong 1.0

10
Ibid. In 1999 The IMF admitted its errors in Indonesia in its internal reports. Despite stopping further
errors, IMF and the donors kept pushing the implementation of IMF’s conditionalities.
11
Anis Chowdhury and Iman Sugema (2005), loc.cit.

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The fund from IMF until 2006, when Indonesia repaid the entire principal and the
interests, was not used at all. The net foreign reserves of Indonesia, which was about US$
24 billion at the time when IMF and Indonesia signed the first EFF, were at a very
healthy level, and there was no need for additional reserves for securing the balance of
payments. Since Indonesia took the floating exchange rate regime, the Central Bank did
not need to intervene in the exchange market on regular basis and therefore additional
reserves were not necessary.12

While Indonesia did not need to use the IMF money, it still ended up bearing the cost. In
2002 Indonesia paid US$ 2.3 billion to the IMF, consisting of US$ 1.8 billion in principal
and US$ 500 million in interest payment13. On average the cost of this idle fund (fees and
interest) was about 3.5 percent. The following table shows the breakdown of repayments
to IMF.

Table 3.8: Disbursement and Repayment of IMF Loans (SDR)

Year Disbursements Repayments Interests

2002 825,720,000 1,375,920,000 153,322,440
2001 309,650,000 1,375,920,000 369,498,855
2000 851,150,000 0 398,846,600
1999 1,011,000,000 0 267,539,445
1998 4,254,348,000 0 133,963,634
1997 2,201,472,000 0 0

The program loans from the World Bank and the Asian Development Bank and other
donors can actually be obtained without tying them to IMF conditionality. The main
reason for involving other donors in the first rescue package was to maintain and prop up
market confidence by showing that the donors collectively were ready to help Indonesia
financially with a large amount of money (US$ 43 billion). The study report of
BAPPENAS revealed that IMF actually did not operate alone; it was backed up by all
donors involved in CGI. When Indonesia decided to end the IMF program in 2003, the
donors decided that Indonesia was no longer eligible for debt rescheduling through Paris
Club.14 So IMF’s program package was needed by the foreign creditors to smooth their
business in taking the advantage from the crisis in Indonesia.

Since 2007 until 2003 there were 20 Letter of Intent and Memoranda of Economic and
Financial Policies (MEFP) signed by IMF and the government of Indonesia. Each MEFP
contains commitments of GoI to implement structural reform measures with the
benchmark criteria. Each semester IMF staff monitored the implementation of the
structural reforms. Reports from IMF were also presented in CGI meetings every six
months, and the commitments of loans and grants of the members of CGI depended on
the recommendations and the monitoring reports from IMF.

12
Ibid.
13
Rizal Ramli, 2002, pg. 13.
14
BAPPENAS (2004), “The Existence and Roles of the Consultative Group for Indonesia (CGI)”,
Summary, p. 9.

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The surprising thing is that reports from the IMF did not influence the market at all; even
the reactions were vice versa. When IMF reported that Indonesian macroeconomy
became more stable, the exchange rate of Rupiah weakened; and when IMF reported that
there should be stricter measures for reform, the capital inflow from foreign investors
tended to increase.

Consultative Group on Indonesia (CGI)

Almost all public donors/creditors of Indonesia were members of CGI. CGI was
established in 1992 with the chairmanship of the World Bank. Until 2000 the meetings of
CGI were held outside of Indonesia. Only since 2000 the meetings were held in
Indonesia, and participation of civil society groups was allowed although only as
observers.

Since 1967 up to 1991, the aid coordination forum was called Inter-Governmental Group
on Indonesia (IGGI) that was chaired by the Development Minister of the Netherlands.
The termination of IGGI and the establishment of CGI were mainly caused by political
reason. The government of Indonesia, particularly the President Suharto himself, found
that the Netherlands Government as the chair of IGGI had utilized IGGI as an instrument
to intimidate and utilized the foreign aid as instrument to impose its policies to the
government of Indonesia.15 CGI was established with the expectation that the aid forum
could focus on the aid per se without linking them to other issues separated from aid.

Since 1992 until the meeting in January 2003, the aid pledge from CGI amounted to US$
58,824.89 million. The trend was that the pledge increased by years, and since 2000 it
declined.16 From 29 countries and organizations participating in CGI, World Bank,
Asian Development Bank (ADB) and Japan were the biggest contributors. In total the
pledge from these three creditors/donors reached 80% of the total pledge. In general, in
the period of 1992 – 2003, there were only 11 participants who made pledge about 1% of
the total pledge, and 5 participants who made pledge of about 2%. Pledge indicates
commitments of the CGI participants to support Indonesia’s development program, but
did not reflect the actual disbursements.

Since 2000 there have been changes in CGI Meetings. The changes included: (1) it was
the first time CGI meetings were held in Indonesia; (2) for the first time CGI invited
participation from NGOs, and (3) CGI formed working groups.17 In reality the changes
did not reflect the country ownership and the country-led CGI. The topics discussed in
CGI meetings and in the working groups often did not reflect the development guidelines
of Indonesia; they reflected the interests of the donors/creditors. The working groups
were dominated by the donors/creditors, both topics and the processes.

15
BAPPENAS, “The Existence and Role of the Consultative Group for Indonesia (CGI)”, Study Report,
2004, p. 8.
16
OECD Report 2006 shows that Indonesia’s position as ODA recipient declined from 2000 to 2005.
17
Lukita D. Tuwo, “Indonesia after CGI”, paper presented in a Seminar by INFID on 2 February 2007,
Jakarta.

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CGI, although it has been chaired by Indonesia since 2004, functioned as an orchestra
with the World Bank as the conductor, where all donors/creditors sang the same song,
and Indonesian Government was treated as sick client that had to follow the prescriptions
of the donors/creditors. The atmosphere in the CGI meeting showed clearly the power
relations between the donors/creditors and the Government of Indonesia.18 CGI
functioned as if it was another legislative body where the executive body of the
government of Indonesia has to be accounted for, ignoring the real legislative institutions
in the country.

Looking at the whole process in CGI meetings and the results of the meetings, where
policy dictations were more than the actual aid disbursements, the termination of CGI in
February 2007 by President Susilo Bambang Yudoyono was reasonable. In the State of
the Union Address in February 2007, the President clearly stated that the termination of
CGI Forum was intended to reduce the coordinated pressures from the creditors/donors.19
The government of Indonesia finally found that CGI was used by certain donors/creditors
to put pressure on Indonesia for their own interests.20

Table 3.8. IGGI/CGI Pledge

Years IGGI/CGI Pledge

(Five Year Plan) Bilateral Multilateral Total (US$
US$ Million % US$ Million % Million)
1967/68 – 1968/69 522.87 98.5 8.18 1.5 531.05
I (1969/70 – 1973/74) 2,870.10 81.8 636.53 18.2 3,506.63
II (1974/75 – 1978/79) 3,062.36 46.8 3,481.66 53.2 6,544.02
III (1979/80 – 1983/84) 3,961.58 38.2 6,419.85 61.8 10,381.43
IV (1984/85 – 1988/89) 5,798.17 39.7 8,804.09 60.3 14,602.26
V (1989/90 – 1990/91) 10,041.90 42.5 13,585.90 57.5 23,627.80
VI (194/95 – 198/99) 12,245.33 42.2 16,769.76 57.8 29,015.09
1999 - 2003 8,824.30 38.6 14,045.80 61.4 22,870.10
Total 47,326.61 42.6 63,751.77 57.4 111,078.38

Source: Directorate of Bilateral Foreign Financing, BAPPENAS, 2003

18
In CGI meeting in 2006, as an example of the atmosphere, IFC asked question whether Indonesia was
committed to the promotion of manufacture industry, particularly textile industry. Considering that the
question was targeted to the Minister of Industry, the Minister seemed to be panic in responding to the
question while skimming through the papers in front of him. CGI meeting was like a court room for the
Government of Indonesia.
19
State of the Union Address, February 2007. See also the explanation of the State Minister of National
Planning, “The utilization of Foreign Aid in Post-CGI Forum”, 1 February, 2007.
20
In INFID statement read in the 2006 CGI Meeting, INFID called for the termination of CGI since the
topics of the discussions in CGI Meetings had moved far from the themes of development aid coordination,
and it threatened the democratic processes and institutions in Indonesia. Certain International NGOs, who
used to being participants and partners of INFID complained about INFID’s position and even stopped
partnership with INFID since they considered CGI was still needed to put pressure on Indonesian
government. They forgot the fact that Indonesia now is a democratic country and they also ignored the
international procedures and agreements on Aid Effectiveness.

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Following tables show the pledge of IGGI/CGI members for supporting Indonesia’s
development. The pledge does not reflect the actual contracts and disbursements. Not all
pledges are actualized. Some were followed up by contracts or agreements but the
agreements were not implemented due to various reasons, such as: the implementers in
the country were not ready, or the conditionalities of the creditors were hesitantly
implemented by Indonesia.

Table 3.9. IGGI/CGI Pledge based on Creditor/donor (%)

Year World ADB Japan Other Other

(Five Year Plan) Bank Multilaterals Bilaterals
1967/68 – 1968/69 1.5 0.0 32.0 0.0 66.4
I (1969/70 – 1973/74) 14.7 3.2 24.2 0.3 57.6
II (1974/75 – 1978/79) 42.5 10.6 13.5 0.1 33.3
III (1979/80 – 1983/84) 43.6 15.3 14.1 3.0 24.0
IV (1984/85 – 1988/89) 39.7 17.8 21.3 2.8 18.4
V (1989/90 – 1990/91) 32.7 21.7 29.0 3.1 13.5
VI (194/95 – 198/99) 27.9 23.8 31.3 5.6 11.3
1999 - 2003 30.7 26.8 26.2 3.9 12.3

Source: Directorate of Bilateral Foreign Financing, BAPPENAS, 2003

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Table 3.10. Summary of the IGGI/CGI Pledge, 1967 - 2003

Pre- Repelita Repelita Repelita Repelita Repelita

Repelita I
Repelita II III IV V VI Total
Donor/
No. 1999 -
Creditor 19769/70
1969/68 – 1975/76 – 1979/80 – 1984/85 – 1989/90 – 1994/95 – 2003 1967 - 2003
– 1974/75
1968/69 1978/79 1983/84 1988/89 1993/94 1998/99
1 Australia 19,43 112,41 185,87 200,34 168,40 226,80 274,66 272,70 1.460,61
2 Austria 0,00 0,00 0,55 0,00 22,27 54,10 88,40 80,00 245,32
3 Belgium 0,40 25,12 47,32 46,92 19,79 60,70 36,71 13,40 250,36
4 Canada 0,78 100,65 162,46 228,45 170,27 144,20 109,79 70,90 987,50
5 Denmark 0,00 8,30 8,35 0,00 0,00 17,40 15,04 26,20 75,29
6 France 11,14 116,95 341,32 783,41 420,59 717,90 379,57 30,00 2.800,88
7 Finland 0,00 0,00 0,00 0,00 4,00 6,20 3,12 1,00 14,32
8 Germany 50,50 211,42 317,85 199,56 216,41 511,00 856,96 431,50 2.795,20
9 Italia 0,40 6,25 4,58 35,97 186,66 66,70 11,52 27,00 339,08
10 Japan 170,00 848,45 882,08 1.467,30 3.104,90 6.850,00 9.095,75 6.004,00 28.422,48
11 Korea 0,00 0.00 0.00 0.00 0.00 27.90 155.86 90.90 274.66
12 New Zealand 0.00 6,521 7,96 0.00 6,03 1,60 15,81 14,00 71,92
13 Netherlands 40,95 207,87 255,07 299,46 378,21 267,20 0,00 198,70 1.647,46
14 Norway 0.00 0.00 0.00 0.00 0.00 1.00 10.00 10.70 21.70
15 Portugal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.90 0.90
16 Spain 0.00 0.00 0.00 0.00 60.00 145.00 174.51 208.00 587.51
17 Sweden 0.00 0.00 0.00 0.00 0.00 0.00 0.00 17.50 17.50
18 Switzerland 0.00 9.60 0.00 3.14 45.24 91.60 50.84 16.10 216.52
19 UK 5,26 95,66 37,55 59,27 414,40 290,50 387,49 135,80 1.425,93
20 United States 224.01 1,120.90 801.40 637.76 581.00 552.10 579.30 1,175.00 5,671.47

Bilateral 522,87 2.870,10 3.062,36 3.961,58 5.798,17 10.041,90 12.245,33 8.824,30 47.326,61
21 World Bank 8,18 514,07 2.780,00 4.525,00 5.800,00 7.730,00 8.100,00 7.034,00 36.491,25
22 ADB 0,00 111,82 695,25 1.584,00 2.600,00 5.119,00 6.900,00 6.130,00 23.140,07
23 EU 0,00 10,64 6,41 52,00 83,29 59,90 0,00 40,00 252,24
24 UN 0,00 0,00 0,00 142,50 206,60 308,00 304,90 489,70 1.451,70
Agencies
25 UNICEF 0,00 0,00 0,00 42,50 67,20 78,00 58,90 23,90 270,50
26 IFAD 0,00 0,00 0,00 73,85 47,00 111,00 114,07 18,00 363,92
27 EIB 0,00 0,00 0,00 0,00 0,00 0,00 244,89 168,20 413,09
28 Saudi Fund 0,00 0,00 0,00 0,00 0,00 0,00 45,00 6,40 51,40
29 Kuwait Fund 0,00 0,00 0,00 0,00 0,00 0,00 87,00 0,00 87,00
30 IDB 0,00 0,00 0,00 0,00 0,00 70,00 735,00 76,00 881,00
31 NIB 0,00 0,00 0,00 0,00 0,00 110,00 180,00 59,60 349,60

Multilateral 8,18 636,53 3.481,66 6.419,85 8.804,09 13.585,90 16.769,76 14.045,80 63.751,77

TOTAL 531,05 3.506,63 6.544,02 10.381,43 14.602,26 23.627,80 29.015,09 22.870,10 111.078,38

Source: the Directorate of Foreign Bilateral Financing, BAPPENAS, 2004.

Conclusion:

The data and facts about the foreign debts to Indonesia, while some bring effects to
Indonesia’s development, most of them were wasteful or have been utilized by the
creditors/donors to dictate policies that should be implemented by the government of
Indonesia. Some of the project loans, particularly those related to infrastructures
development, have contributed to the expansion of physical development in Indonesia,

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though most of them have not been free from continuous lending. The loans that used for
purchasing capital goods are mainly for the projects that are related to the interests of the
creditors.

The programs loans have no clear advantage for Indonesia; even on the contrary, most of
them have been proved to be wasteful. Most of the program loans from multilateral
agencies were used to justify the presence of the agencies and their staff members in
Indonesia rather than for promoting capacities of the government staff. The good
governance that is promoted now in Indonesia is a result of the democratization processes
rather than the results of the works of the consultants paid by the program loans. The
program loan from IMF was the best example of wasteful and harmful loans in
Indonesian history, and can become a case study how an International Organization
undermined state sovereignty and ignored the democratic processes in a country.

Looking at the annual percentage of the portion of the foreign debts to Indonesia, which
is below 3% of the annual state budget, the contribution is not too significant for the
development of Indonesia. The major determinant factor of the economic achievements
of Indonesia in the past was the domestic financial capacities. The foreign debts become
problematic and burdensome when the maturity of the debts is accumulated at the almost
the same period, that put pressures on the state budget in later years.

The small portion of the foreign debts, however, has triggered the heavy foreign
intervention in Indonesia’s economic and political system. The coordinated pressures
from the donors/creditors through IGGI/CGI put Indonesia in such a condition that tied it
to the agreements with the donors/creditors, and made it difficult for Indonesia to get rid
of debt trap. Added with the fact that the staff members of the donor agencies are driven
by self-seeking behavior, while they are working together with Indonesian officials in the
offices of the Central Government of Indonesia, the policy measures from Indonesian
government that are more pro-poor, pro-job and pro welfare of Indonesians are hardly
expected.

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