ODA loans to RI should shift to public welfare

To achieve their national development goals, developing countries, or less developed countries (LDCs), require both cooperation and assistance from developed countries. With rapid globalization and the accompanying major concerns of energy, food supplies, financial and monetary crises, poverty and the global environment, donor institutions are becoming much more significant.

However, some donor or assistance programs are considered to have failed because of their inability to harmonize actual needs with program designs.

In the case of the Japanese Overseas Development Aid (ODA) program, the following seven areas of its loan operations are prioritized: 1) strengthening support for poverty reduction, 2) developing infrastructure for economic growth, 3) supporting environmental improvement and antipollution measures, 4) addressing global issues, 5) supporting human resource development, 6) supporting the dissemination of information technology and 7) supporting provincial development.

For Indonesia its priority is on economic infrastructure, as this is considered crucial for sustainable growth and the smooth implementation of ongoing projects.

Since the first ODA loan in 1968, the Japan Bank for International Cooperation (JBIC) has adjusted the focus of its assistance along with changes in Indonesia's needs. The priority in the 1960s and 1970s was power, while the 1980s saw an increased demand for the transport sector, including roads and ports, a national transportation network, as well as irrigation and flood control to increase food production.

In the 1990s, efforts expanded to include social services such as education and health. By end of March 2000, the JBIC made 598 ODA commitments to Indonesia for a total of 3,451.8 billion (JBIC, 2001). By sector, the loans were distributed as follows:

Table 1 indicates that either the JBIC or the Indonesian government has paid less attention to social development than to economic infrastructure like irrigation, electric power and transportation. Ironically, only 8.3 percent of the total funds were allocated for social sectors -- poverty alleviation, health, education, gender empowerment and human resource development.

However, a comparison of ODA aid for social services in Indonesia with other LDCs shows that this sector should be emphasized more. The ratio of social sector allocations to total ODA loans in Indonesia is relatively small compared to other LDCs.

For instance, some Latin American countries prioritize social services in their national development strategies, by allotting 39.3 percent (Mexico), 35.6 percent (Peru) and 29.1 percent (Brazil) of total ODA loans.

The percentage of social sector funding in some Southeast Asian countries such as Malaysia and Thailand is also higher than in Indonesia.

Recently, social development in Indonesia has tended to decelerate due to the severe economic and currency crisis. Although the situation has improved since bottoming out in 1998, the number of people facing the threat of poverty is from 30 percent to 60 percent of the population.

Thus the government, the private sector and donor institutions should pay more attention to social services, particularly to human capital and human development. The JBIC should alter its policy to promote welfare and other social aspects, rather than the construction of economic infrastructure.

Building a strong and independent society is much more beneficial for securing a strong economic foundation, especially in the long term. Infrastructure expansion usually focuses merely on short-term solutions through labor-intensive projects.

But successful social development produces a sturdy and innovative society that can help itself out of any crisis.

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