INFID’S STATEMENT

THE IRONY OF INDONESIA’S 65 YEARS OF INDEPENDENCE,

SOVEREIGNTY THREATENED BY DONOR INTERVENTION

A few days left before Indonesia commemorates its 65 years of independence. Amidst a
multidimensional crisis that continues to plight Indonesia, among others mounting foreign debt,
unrelenting high rates of poverty, unbridled corruption and the plundering of natural resources,
the country’s spirit of independence and sovereignty should be able to lift it out of this
multifaceted crisis.

It is ironic however, that as Indonesia approaches 65 years of self-rule, the nation is shorn of its
independence and sovereignty due to the World Bank’s intervention in the administration of the
country. This week, the World Bank has warned several districts and municipalities in West
Nusa Tenggara Province on having failed to establish the Extension Implementing Agency
(Bappeluh). (“The World Bank Tells Off Districts for Not Establishing Bappeluh”, ANTARA,
11 August 2010).

The establishment of Bappeluh is one of the requirements imposed by the World Bank on
districts and municipalities implementing the Farmer Empowerment through Agricultural
Technology and Information (FEATI) program. Another requirement which the Indonesian
government must meet is to prepare counterpart funds worth USD 30.8 million through the
national and local budgets. FEATI is the World Bank’s loan to the Indonesian government
amounting USD 92.8 million entered into through an agreement signed on 28 March 2007.

With regard to this, INFID asserts that the World Bank’s reprimand of districts and
municipalities which have failed to set up the Bappeluh proves to demonstrate World Bank’s
arrogance as a donor agency in implementing its programs in Indonesia. The Paris Declaration
on Development Effectiveness plainly states that donors commit to respect country leadership
and help strengthen their capacity to exercise it/ownership.

In the Jakarta Commitment signed by the World Bank, it is also stated that “development
partners will align themselves more fully with Government programs and systems.
Development partners will align their programming cycles with those of government, use the
government format for reporting their assistance, and increasingly use the government’s financial
management and procurement system. When they do not make use of systems, development
partners will transparently state their rationale for not using government systems and
indicate how they will work with the Government (including through capacity
development) to align in the future. In the spirit of partnership, we will also encourage
development partners to fully, sincerely and transparently untie their aid.

In view of this, the World Bank’s move is clearly in contradiction with the Paris Declaration and
the Jakarta Commitment, and is a form of donor intervention on Indonesia’s development
sovereignty.

The World Bank’s intervention on the development sovereignty of Indonesia is not merely
confined to program implementation but also on the development goal itself. As the second
largest creditor among multilateral financial institutions after ADB in Indonesia, the World Bank
provides loans for several sectors including agriculture.

An INFID study on several projects and programs financed through World Bank loans has
revealed that these agendas have failed to bring about any positive development impact but
instead have become an increasingly burdensome debt. INFID’s research on PNPM (National
Program on Community Empowerment) has shown that the program focuses more on physical
development while disregarding the social capital put together by the community. PNPM has
instead shattered the collective values emerging from and shared among members of society.
This also holds true for the Jakarta Emergency Dredging Initiative (JEDI) financed by loans for
the dredging of 13 rivers in Jakarta. INFID’s research yet again found that JEDI is ineffective in
solving the flooding problems and has imposed a heavier foreign debt burden on the government
of Indonesia as the effect of river dredging will only lasts for a maximum of five years whereas
the government must repay the loans for a span of ten years.

Bearing this in mind, INFID urges the government of Indonesia to desist from bowing to the
one-sided wishes of the World Bank and other donors which clearly pose a threat to Indonesia’s
political and economic sovereignty. INFID also insists that the World Bank ceases all forms of
policy interventions that interfere with Indonesia’s political and economic sovereignty.
Jakarta, 12 August 2010

Sincerely,

Don K Marut

Executive Director

For more information please contact:

Wahyu Susilo - INFID Program Manager