Govt, aid agencies exaggerate Indonesian crisis: WB study

JAKARTA, Jan 25: The Indonesian government and some international aid agencies have exaggerated the impact of the country's economic crisis on the poor, according to reports commissioned by the World Bank, reports AP.

For example, one study says the number of Indonesians living in poverty increased from 11 per cent in 1997 to 13.8 per cent in 1998, far below the government's estimate of 40 per cent.

The report also contradicts a prediction by the UN's International Labour Organisation that two out of every three Indonesians would be living below the poverty line in 1999.

The conclusions could damage Indonesia's campaign to raise more international loans for its upcoming budget to help tackle the worst economic turmoil in three decades.

Soaring inflation and unemployment have plagued the nation of 210 million people, setting off civil unrest that helped oust former President Suharto after 32 years of authoritarian rule.

Three preliminary reports on the crisis were prepared by Jakarta-based independent consultants for presentation Monday to the Consultative Group on Indonesia. The group consists of Indonesia's main international donors and is chaired by the World Bank.

The studies show that Indonesia's turmoil, caused largely by a financial and corporate debt crisis, has hit urban areas hard while rural regions have proven more resilient.

"The new data suggests that the dire forecasts are wrong and by a lot, not a little," said one report that was produced as a background note for the World Bank's social safety net programme.

"While Indonesia is suffering a severe crisis, it is not the universal disaster that some would have it," it said.

Government estimates that 22 per cent of the work force, or 20 million people, were unemployed by the end of 1998 "clearly do not hold up under analytical scrutiny," a study said.

It argued that Indonesia's flexible labour market makes it easier to find work, particularly in the informal sector.

"Overall, the crisis has a strong urban bias where the depreciated rupiah, corporate debt, illiquid banks, exorbitant interest rates, exit of foreign investment and lack of trade finance have to a large extent paralyzed the formal economy," the background report said.

The data emerged as the Indonesian government scrambles to raise more international loans to help plug the expected hole in its 1999/2000 fiscal year budget.

The budget assumes that Indonesia will receive $10.3 billion in foreign loans in order to balance the budget, as is required by Indonesia's constitution.

Of this, the government says it has already secured $4 billion. Senior Economics Minister Ginandjar Kartasasmita said last week that he expected to raise $ 5 billion more from Japan, the Asian Development Bank and the World Bank.

Information that many estimates of the poverty situation in Indonesia were inaccurate could harm the country's chances of tapping international lenders again, analysts agree.

Indonesia is the recipient of a multibillion-dollar aid programme led by the International Monetary Fund in exchange for reforms of its shattered economy.