The Dangers of Borrowing Money from the World Bank and ADB

A senior researcher of Core Indonesia, Muhammad Ishak, reveals the danger of borrowing $ 4.2 billion from the World Bank and the Asian Development Bankk (ADB).

“The loans from donor agencies are certainly not free because we could be held bound by various commitments in their favor, especially big countries which become the largest shareholder in these agencies,” said Muhammad Ishak to mediaumat.com on Thursday ( 24/9).

According to him, the poor track record of the World Bank has been very popular. When providing financial assistance, the agency whose biggest holder is the US always require us to have a commitment to the debtor countries to implement policies in line with the views of the agency but very detrimental to the borrowing countries.

“Among the policies are deregulation, economic liberalization, privatization, and the reduction of the roles of the government, while the ADB is a tool of Japan to strengthen the influence of its foreign policy and economy in Asian countries”, he said. Moreover, the Asian Infrastructure Investment Bank led by China makes Japan continue to maintain its influence in Asian countries.

“The case of the fast train project is the latest evidence of the competition of both countries. Let alone other projects such as the construction projects of electricity and gas infrastructure, “he explained.

He also said the the reliance on foreign debt makes Indonesia increasingly dependent. Japan and China, for example, impose various requirements that benefit their economies when providing loans to the Indonesian government. Feasibility studies, designs, constructions, procurement of raw materials, and contractors for the projects must come from their countries.

“In the case of China, we even have to let their unskilled workers work in those projects, though these unskilled workers are available in abundance in this country, “he said.

In addition, the government must pay the debt interest taken from the state budget. The foreign debt has reached RP 2,911 trillion until July 2015 while the payment for debt Interest for this year has reached Rp 156 trillion.

“The more loans mean the greater burden for the country’s economy, especially in the weakening exchange rate of rupiah which will swell the foreign debt, “he concluded. [] JP/RZ