The Case of ODA’s Role In Developing “New Indonesia” Paper submitted as Prerequisite for “Development Assistance” Course (Prof. SATO Ikuro) Submitted by: Tri Widodo W. Utomo (DICOS M1, 300202040)

1. 1
“
“
“
“Development Assistance
Development Assistance
Development Assistance
Development Assistance”
”
”
” (Prof. SATO Ikuro)
Submitted by: Tri Widodo W. Utomo (DICOS M1, 300202040)
JAPAN
JAPAN
JAPAN
JAPAN’
’’
’S ODA: WHAT SHOULD BE THE COMING PRIORITY?
S ODA: WHAT SHOULD BE THE COMING PRIORITY?
S ODA: WHAT SHOULD BE THE COMING PRIORITY?
S ODA: WHAT SHOULD BE THE COMING PRIORITY?
(The Case Of ODA
(The Case Of ODA
(The Case Of ODA
(The Case Of ODA’
’’
’s Role In Developing
s Role In Developing
s Role In Developing
s Role In Developing “
“
“
“New Indonesia
New Indonesia
New Indonesia
New Indonesia”
”
”
”)
)
)
)
It is undeniable that in order to achieve their national-development goals, developing
countries (LDCs) require both cooperation and assistances from developed countries. As
globalization process emerges so rapidly and global issues such as energy, food supply,
financial and monetary crisis, poverty, and global environment turns into the major
concerns, the existence and role of donor institutions are becoming much more
significant. However, some donor or assistance programs are considered as failed,1 due
to their incapability in harmonizing the actual peoples’ needs with the design of the
programs. If developed countries’ aid programs are supply side in economic relations,
then they must be planned to satisfy the demand side, that is, developmental needs of
LDCs.
In the case of ODA’s program in accelerating development in LDCs, the following seven
areas of ODA loan operations are prioritized: 1) strengthening support for pocerty
reduction, 2) developing infrastructure for economic growth, 3) supporting
environmental improvement and anti-pollution measures, 4) addressing global issues,
5) supporting human resource development, 6) supporting the dissemination of
information technology, and 7) supporting provincial development. Meanwhile, in
promoting Indonesian development, the priority assistances of ODA to this country are
placed on economic infrastructure development, as it will provide crucial underpinnings
for sustainable growth, and smooth implementation of the on-going projects.2
Since the first ODA loan in 1968, JBIC has adjusted the focus of assistance in
accordance with changes in Indonesia’s development needs. For example, the priority in
the 1960s and 1970s was power, while the 1980s saw an increased demand for transport
sector development, including roads and ports, to construct national transport network,
as well as development of irrigation and flood control sector to increase food production.
In 1990s, efforts were made to provide a broader range of assistance, including social
services such as education and health. As of the end of March 2000, JBIC had made 598
ODA commitments to Indonesia with a total of ¥3,451.8 billion.3 By sectors, the loans
are distributed as the following:

2. 2
Table 1.
Table 1.
Table 1.
Table 1. ODA Loan Commitment to Indonesia by Sectors
Sector
Sector
Sector
Sector
Number of
Number of
Number of
Number of
Commitments
Commitments
Commitments
Commitments
Total Amount
Total Amount
Total Amount
Total Amount
(billion
(billion
(billion
(billion¥
¥
¥
¥)
)
)
)
Ratio f
Ratio f
Ratio f
Ratio from
rom
rom
rom
Total (%)
Total (%)
Total (%)
Total (%)
Commodity Loans 28 959,526 27.8
Transportation 149 754,774 21.9
Electric Power & Gas 127 603,922 17.5
Irrigation & Flood Control 83 357,228 10.3
Social Services
Social Services
Social Services
Social Services 60
60
60
60 286,296
286,296
286,296
286,296 8.3
8.3
8.3
8.3
Mining & Manufacturing 71 232,821 6.7
Telecommunications 54 144,242 4.2
Agriculture, Forestry & Fisheries 18 64,540 1.9
Others 8 48,433 1.4
Source: JBIC, ODA Loan Report 2001 (modified).
Table 1 indicates that either JBIC or Indonesian Government pays less attention to
social development rather than economic infrastructure like irrigation, electric power,
and transportation. Obviously, it is quite ironical that only 8.3% of total fund is
allocated for social sectors which covers wide aspects of development such as poverty
alleviation, health, education, gender empowerment, and human resource development.
Moreover, table 2 below implies that compare to other LDCs, the development of social
services sector in Indonesia needs to be more emphasized.
Table 2.
Table 2.
Table 2.
Table 2. ODA Loan Commitment to Selected LDCs in Social Services Sector
Country
Country
Country
Country No. of Com.
No. of Com.
No. of Com.
No. of Com. Total (billion
Total (billion
Total (billion
Total (billion¥
¥
¥
¥)
)
)
) Ratio (%)
Ratio (%)
Ratio (%)
Ratio (%)
Mexico 3 80,742 39.3
39.3
39.3
39.3
Peru 13 119,655 35.6
35.6
35.6
35.6
Brazil 3 63,056 29.1
29.1
29.1
29.1
Turkey 2 94,783 23.0
23.0
23.0
23.0
Malaysia 11 165,652 20.0
20.0
20.0
20.0
Tunisia 3 17,318 11.3
11.3
11.3
11.3
Thailand 32 193,224 10.3
10.3
10.3
10.3
Indonesia
Indonesia
Indonesia
Indonesia 60
60
60
60 286,296
286,296
286,296
286,296 8.3
8.3
8.3
8.3
India 13 128,393 7.7
7.7
7.7
7.7
Vietnam 9 51,030 7.5
7.5
7.5
7.5
Philippines 26 132,403 7.3
7.3
7.3
7.3
Source: JBIC, ODA Loan Report 2001 (modified).

3. 3
From table 2, we can see that in comparative perspective, the ratio of social sectors
allocation to total ODA’s loan in Indonesia is relatively smaller than those of other
LDCs. For instance, some Latin American countries have placed social services sector
on the first priority of their national development strategy, by allotting 39.3% (Mexico),
35.6% (Peru), and 29.1% (Brazil) of total ODA’s loan. Disregard with number of
commitment and total amount of loan, the percentage of social sectors funding in some
ASEAN countries such as Malaysia and Thailand, is also higher than in Indonesia.
Recently, the social development in Indonesia tends to be decelerated due to the severe
economic and currency crisis. As a result, the proportion of people living in poverty
climbed to more than 20%. Although the situation has been improving after bottoming
in 1998, it is said that people facing the threat of potential poverty account for 30% to
60% of the population.4 Regarding HDI (human development index), the 2001 UNDP
report5 shows that of 162 countries, Indonesia lies on 102nd position and has only 67.7
point. Although this feature is better than in 19996 when Indonesia ranked 109 of 174
countries with 64.3 point, but worse than in 19967 when Indonesia reached the best
performance and ranked 99 of 175 countries with 69.0 point.
Based on those empirical illustrations and basic consideration that a program should be
match with the peoples’ real needs, development policy and strategy in Indonesia
require to be readjusted. Government, private sector, and donor institutions should pay
more attention to social service development in general, and particularly to human
capital or human development. In such policy changes, JBIC is demanded to alter its
policy in the future by providing loans or assistances for promoting peoples’ life and
other social aspects, rather than for constructing economic infrastructure. In other
words, the proportion of ODA’s loan to Indonesia should be more utilized for
strengthening peoples’ capacity through acceleration of social service development.
This is not to say that economic infrastructure is not important, but building strong and
independent society is much more beneficial for securing economic foundation,
especially in the long-term process. On one hand, physical or infrastructure expansions
usually focus merely on short-term solution through the implementation of
labor-intensive projects. On the other hand, conversely, successful social development
would produce sturdy and innovative societies, which are able to help themselves
(self-help mechanism) from any disadvantageous circumstances. Finally, a strong,
independent, sturdy and innovative society, I completely believe, is the prerequisite for
accomplishing sustainable (economic) development in a country.

4. 4
Endnotes:
Endnotes:
Endnotes:
Endnotes:
1 The failure of technical assistance is quite well described by Gray concerning the aid program in
Africa. He quotes Edward Jaycox, vice president of World Bank’s Africa region, who mentioned that
the use of expatriate resident technical assistance by aid donors as “a systematic destructive force
which is undermining the development of capacity in Africa”. See in detail: Clive S. Gray, (…),
Technical Assistance and Capacity Building for Policy Analysis and Implementation, in Merilee S.
Grindle (ed.), Getting Good Governance: Capacity Building in the Public Sector of Developing
Countries, Harvard Univ. Press, p. 413.
2 JBIC (Japan Bank for International Cooperation), April 2002, Basic Strategy of Japan’s
ODA Loan: Medium-Term Strategy for Overseas Economic Cooperation Operations, Tokyo,
p. 10 and 17.
3 JBIC (Japan Bank for International Cooperation), ODA Loan Report 2001, Tokyo, p. 23.
4 Ibid.
5 UNDP, 2001, Human Development Indicators 2001 (available online at http://www.undp.org/hdr2001/back.pdf or
http://www.undp.org/hdr2001/indicator/pdf/hdr_2001_table_1.pdf). Also see: BPS, BAPPENAS, and UNDP,
2001, Indonesian Human Development Report 2001: Towards A New Consensus, Democracy and Human
Development in Indonesia, Jakarta.
6 UNDP, Human Development Indicators, 1999.
7 UNDP, Human Development Indicators, 1996.