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| January 21, 2005 |
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| Donors Pledge $5.1 Billion To Tsunami-Hit Indonesia |
WASHINGTON - January 21, 2005. Indonesia's main donors pledged on Thursday to give $5.1 billion in aid
this year, far more than Jakarta expected, including $1.7 billion to help rebuild northern Sumatra, where 166,000 people died in last month's
tsunami, reports Reuters (01/20).
Indonesian chief economics minister Aburizal Bakrie told reporters at the
end of the two-day meeting of the Consultative Group on Indonesia (CGI)
that the group of 30 lenders had promised $1.7 billion in tsunami aid for 2005 - $1.2 billion in grants and $500 million in soft loans. That's on
top of $3.4 billion the donors pledged in ordinary aid that will go mostly
toward reducing the national budget deficit. In a statement to the
meeting, the World Bank said Indonesia needed to borrow $10-$11 billion a
year over the next four to five years, around $7-$8 billion of that to
repay existing debt. While the country's public debt was "declining
rapidly into safe territory, debt service payments were still a big
burden". Indonesia's total foreign debt, including government and private
obligations, was $134.3 billion in October, of which $78.6 billion was
government debt.
The Asian Wall Street Journal (01/21) notes that Thursday's pledge of
disaster-relief aid is a key first step toward gathering the approximately
$4.5 billion that Indonesia says it will spend during the next few years
to rebuild a huge number of homes destroyed in the disaster, as well as to replace 120 kilometers of roads, ports, hospitals and other facilities.
That bill is the equivalent of approximately 2.2 percent of Indonesia's annual gross domestic product. Indonesia also has indicated it plans to take advantage of an offer from members of the Paris Club of a temporary moratorium on debt payments. That could allow it to divert as much as $2 billion in spending previously earmarked for debt repayments toward the recovery effort, depending on how long the offer lasts.
Kyodo (Japan, 01/21) adds that Japan, along with the World Bank and the
Asian Development Bank, remained the largest donors at the CGI meeting.
For the regular loans and grants, the total pledge of the three donors
reached $2.09 billion with Japan pledging $715 million. Meanwhile for
Aceh, the three pledged a total of $438 million in which Japan gave a
$177-million package of soft loans and grants.
The Financial Times meanwhile reported Thursday (01/20) that even as
Jakarta offered at the CGI meeting an assessment filled with daunting
details of the devastation, it became increasingly clear that the final
cost of reconstruction remained uncertain. "It is very difficult to say
what that number is going to be," said Ani Dasgupta, a World Bank
economist who helped draft two government reports presented to donors. The data, compiled by Jakarta with the help of international donors, reports that more than 1,000 villages and urban communities were destroyed in the disaster. Altogether, the jobs of more than 500,000 people have been lost.
In a 200-page report assembled with the help of the World Bank, Jakarta
promised that Aceh would become a "growth pole of Indonesia that attracts investment from the whole region and is resilient and protected against new disasters". The report offered possible programs drawn from
experiences in Afghanistan, East Timor, Rwanda and beyond. But it also
presented contradictory messages. "A top-down reconstruction program," the
report said, would only "exacerbate" the "high levels of suspicion, a
depressed economy, and an unwillingness to approach formal authorities" caused by almost three decades of conflict in Aceh before the disaster. Yet it added that survivors wanting to rebuild communities "completely destroyed" by the tsunami would "need official authorization…to get
started".
Some costs were calculated with great precision - environmental damage in
Aceh was valued at $664.6 million. Elsewhere, however, the report made
clear the real cost of reconstruction in Aceh was likely to remain
nebulous for some time. Rebuilding "paralyzed" local governments would cost $81.2 million, the report predicted, although it added that was "likely to increase" because "reconstruction will seek to strengthen and 'disaster-proof' physical infrastructure by rebuilding to higher standards".
The Voice of America (01/19) finally notes that in the past, the meetings
of the CGI have been something of a report card on Indonesia's economic
progress. But this year's consultations were dominated by the disaster that devastated the region in and around Banda Aceh. International donors like the members of the CGI had high hopes that the recently elected
government of President Susilo Bambang Yudhoyono would use its mandate to
enact sweeping economic and political reforms. President Yudhyono moved to
reassure donors that he was still committed to reform, but reform often
requires sacrifice by the public. Some analysts fear the extra burdens
placed on the country by the disaster will make it difficult to prescribe
distasteful medicine for the people.
Source: The World Bank |
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