FOREIGN AID

Name : Dicky Satria Ramadhan (C1G017010)

Arif Rahman Saleh (C1G017040)
R.Bg Surya Anjar Wijaya (C1G0170042)
MAIN DISCUSION

 Source of Foreign Aid in Indonesian

 Comparison Among ASEAN Countries
 Role Of Foreign Aid in Economic Development
Definition of Foreign Aid

 Foreign aid is defined as the transfer of resources from one country

to another. This transfer includes every capital flow to developing
countries. Developing countries usually do not have a strong
industrial base and are characterized by a low Human Development
Index (HDI). Foreign assistance is generally given in the form of
loans or grants.

 Foreign aid is a number of funds provided by relatively developed

countries to developing countries or economically poorer countries
(Robert Gilpin)

 Foreign aid is the transfer of money, technology or technical advice

from donor countries to recipient countries. (KJ. Holsti)
The motive for foreign aid according to
Alan Rix
 Humanitarian Motives Rich countries have a
humanitarian responsibility to help poorer countries.
 Political Motives These motives are useful for building
the image of rich countries in the face of countries that
receive aid or donors.
 Economic motives are motives that are usually used to
facilitate donor countries' access to achieve their goals
for export and import activities as well as for the
purpose of accessing resources owned by donor
recipient countries
Sources of Foreign Aid
Financing
1. Consultative Groups on Indonesia (CGI) •
Bilateral assistance, namely foreign aid originating from the
government of a country incorporated in the CGI, such as Japan,
West Germany, the United States and others, through a financial
institution / body formed by the country concerned to manage / carry
out everything that relating to providing foreign assistance to the
borrowing country.

2. Non CGI consists of:

 Bilateral assistance, namely foreign aid originating from a body
formed by aid providers such as the SFD (Saudi Fund for
Development) and KFAED (Kuwait Fund for Arab Economic
Development).
 Multilateral assistance, namely foreign assistance from
international financial institutions / bodies in which Indonesia is a
member such as the IDB (Islamic Development Bank).
 Role of Forign Aid
Role of foreign aid can be expressed as following:
I. To avoid Starvation and Malnutrition: Foreign aid is useful to avoid
starvation and malnutrition resulting from drought and natural disasters in
the poorest developing countries. Although this use of foreign aid does not
directly speed up development process, it is important on humanitarian
grounds. Foreign aid permits the recipient developing nations to invest more
than it is able to save domestically and to import more than it can finance
through its exports. Foreign aid is most effective when it acts as a catalyst to
greater domestic development effort by overcoming bottlenecks.
II. To Invest More than Savings In developing countries the savings level is
very low as compared to their required investment level. Foreign aid makes
them able to fulfill this gap and undertake new projects for their
development and prosperity. In this way foreign aid makes it possible to
invest more than savings.
III. Import More than the Exports In developing economies the export volume
is low and consists of raw material and agricultural products whose prices
are low in international markets, which is why normally developing
economies have low export earnings. Whereas they have to import a lot of
goods and services, such as machineries, new technologies, experts’ services,
medicines etc. for their development. Foreign aid makes it possible for them
to import more than their export earning and accelerates their economic
development.
Definition of Grant

 Grant is a gift (voluntary) by transferring the right to

something to another person (KBBI)
 Grants are all state revenues originating from domestic
private contributions and contributions from private
institutions and foreign governments. (Law No. 2 of
2000 concerning State Budget Revenue and
Expenditures for Fiscal Year (APBN TA) 2000)
Purpose of the Grant

 Support national development programs

 Support the handling of natural disasters and
humanitarian assistance
Grants according to the
scheme or form
 Grants in cash These grants are very limited and
are given to very poor countries (per capita income
per year is less than USD 200). The aim is to
improve the balance of payments of these
countries.
 Grant Goods and Services, Grants in the form of
goods and services in the context of project
assistance or financial cooperation
 Grants in the context of technical assistance or
technical cooperation
 Grants in the context of humanitarian aid
(humanitarian aids) These grants are more of an
emergency aid.
The rate of receipt of grant
income
Grant income according to
the form
Definition of Foregin Debt

 Foreign debt is a portion of a country's

total debt obtained from creditors outside
the country. Recipients of foreign debt can
be in the form of governments, companies
or individuals. The form of debt can be in
the form of money obtained from private
banks, governments of other countries or
international financial institutions such as
the IMF and the World Bank (Ulfa &
Zulham, 2017).
Debt Objectives

 Improvement of infrastructure facilities and

infrastructure
 The increasing of Human Resources quality
Foreign Debt Motive

 Political Motives These motives are useful for building

the image of rich countries in the face of countries that
receive aid or donors.
 Economic motives are motives that are usually used to
facilitate donor countries' access to achieve their goals
for export and import activities as well as for the
purpose of accessing resources owned by donor
recipient countries
Indicator for measuring the debt

 Debt service ratio (DSR), which is a

comparison between the obligation
to pay debt and foreign debt
installments with foreign exchange
from exports.
 Debt to Export Ratio, which is the
ratio of debt to exports.
 Debt to GDP Ratio, which is the ratio
of debt to GDP. Debt to GDP ratio
Debt service Ratio (DSR)
2010-2018
DEBT TO SERVICE RATIO
70

60

50

40

DEBT TO SERVICE RATIO

30

20

10

0
2008 2010 2012 2014 2016 2018 2020
Debt to Export Ratio
(DER)

DEBT TO EKSPORT RATIO

200

180

160

140

120

100
DEBT TO EKSPORT RATIO
80

60

40

20

0
2008 2010 2012 2014 2016 2018 2020
Debt to GDP Ratio

DEBT TO GDP RATIO

35

30

25

20

15
DEBT TO GDP RATIO

10

0
2008 2010 2012 2014 2016 2018 2020
Why Indonesia need debt?
Project financed by debt
 Sources of funding for foreign
debt
 International Bank for Reconstruction and Development (IBRD)
is an international financial institution that offers loans to developing countries.
 Asian Development Bank (ADB)
is a multilateral development financial institution dedicated to reducing poverty
in Asia and the Pacific.
 International Development Association (IDA)
This institution is the same as IBRD, part of the World Bank. The goal is also
more or less the same as IBRD
 Islamic Development Bank (IDB)
Islamic Development Bank or IDB. Banks that represent Islamic countries.
 International Fund for Agricultural Development (IFAD)
IFAD is an institution that is engaged in advancing the agricultural sector
 Data Foreign creditor institution

Lembaga
2010 2011 2012 2013 2014 2015 2016 2017 2018
Kreditur

IBRD 9.052 9.606 10.423 11.339 12.176 14.380 15.812 16.563 16.993

ADB 11.149 10.798 10.377 9.391 8.630 9.194 9.311 9.013 9.915

IDA 2.315 2.274 2.208 2.098 1.880 1.677 1.474 1.390 1.209

IDB 405 465 522 556 581 643 701 909 973

IFAD 81 119 130 138 145 155 166 188 179

 Comparison Of Asean Counrty
Debt 120
NEGARA 2014 2015 2016 2017 2018

INDONESIA 24,7 27,4 28,3 29,4 29,9

100

BRUNEI DS 3,23 2,95 3 2,6 3

80
KAMBOJA 34,1 32,5 33,68 35,13 35

SINGAPURA 96,6 100,5 106,7 110,8 110 2014

60
2015
LAOS 58,58 57,9 59,83 58,2 50 2016
2017
40 2018
MALAYSIA 56,1 57,9 56,2 54,1 51

THAILAND 43,3 42,54 41,8 41,88 42

20

MYANMAR 29,9 34,53 35,74 35,1 34

PHILIPHINA 42 41,46 38,96 37,82 41,9 0

VIETNAM 55 56,9 59,83 58,2 57,5

THANK YOU