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The scandal of Japanese aid to
Indonesia
By Nobuyuki Takahashi
Indonesia is inescapably tied to Japan,
especially in economic relations. As of March 2001,
official development assistance (ODA) by the Japanese
government to Indonesia had accumulated to 4.34 trillion
yen (about US$36 billion). Out of that total, 89 percent
was yen loans. At the same time financial assistance
provided by the Export-Import Bank of Japan (now merged
with the Japan Bank of International Cooperation, or
JBIC) mounted to 4.217 trillion yen.
And up to 2000,
since then president Suharto allowed foreign investment
in 1967, Japanese companies concentrated the largest
amount of foreign direct investment (FDI) in Indonesia
with a share of 14.1 percent. As a result, according
to the Japanese Foreign Ministry, products made by
Japanese companies have dominated the Indonesian market,
accounting for 65 percent of the refrigerators, 70
percent of the color TVs, 80 percent of the motorbikes
and 90 percent of the cars in the country.
When the Asian financial crisis struck in 1997, Indonesia was
hit hardest, a fact that eventually ended the long
dictatorship of president Suharto. Under International
Monetary Fund (IMF) conditions of extremely tight fiscal
policy, the Suharto administration was trapped between
currency speculators and a national democracy movement
fueled by the Indonesian people's accusations that
Suharto himself was to blame for the crisis. By failing
to implement IMF conditions he lost his source of
financial rescue and expose the rupiah to devaluation,
thereby expanding the country's indebtedness to Japan.
Japanese prime minister Kiichi Miyazawa
advocated bilateral cooperation with Indonesia, but as
Japan was in reality an integral part of the IMF-World
Bank complex, Tokyo balked at resuming financial
assistance before getting the green light from the IMF.
Meanwhile in Indonesia, opposition to the Suharto family
- accused of taking $15 billion in bribes during the
regime - grew, exposing the Japanese government and
corporations as the despised administration's biggest
financial sponsor and economic partner for more than 30
years. Yet without developmental aid from Japan, the
country cannot launch real reforms and emerge from the
shadow of the Suharto era.
Public opinion in
Japan requires structural reform of the Foreign Ministry
and transparency of ODA toward Indonesia and other
underdeveloped countries, since the huge amount of
official money involved has lured general contractors
and private companies into making connections with
ministry officials. The criminal case against Suzuki
Muneo, the former director general of Hokkaido
Development Agency, is just the tip of the iceberg of
the ailing structure of Japanese aid policy. Muneo, a
former member of Japan's ruling Liberal Democratic
Party, raised a political contribution of 400 million
yen in one year, nearly half of it from companies that
won public tenders.
An example of the hardship
caused by the relations between the Japanese Foreign
Ministry and the Suharto family is the Koto Panjang dam
project on the Indonesian island of Sumatra, financed by
31.2 billion yen in Japanese ODA. The project, involving
Hazama Corp and Tokyo Electric Power Group, forced
23,000 residents to live under harsh conditions for more
than 10 years, with many of them evicted from their
villages. Thousands of these people are now taking their
complaint to the Japanese courts. On September 5, the
first-ever lawsuit involving Japanese government ODA
will take place in Tokyo District Court. There are
already an unprecedented 3,200 plaintiffs in the case, a
number expected to swell to more than 5,000 by
September. They allege that while 30 billion yen went to
Japanese contractors and the Suharto family, residents
were deprived of their homes and means of making a
living, and a huge amount of debt has been placed on the
shoulders of Indonesian people.
The sad story
began in the early 1980s, when Tokyo Electric Power
Service Co Ltd conducted a feasibility study at the Koto
Panjang dam construction site as requested by the Japan
International Cooperation Agency (JICA), an affiliate of
the Foreign Ministry. The study failed to confirm power
demand to justify the project. However, in the late
1980s the Suharto administration announced a new
plantation project in Sumatra to provide the needed
justification for the power project. As a result, JICA
and the Overseas Economic Corporation Fund (OECF), now
merged into the JBIC, started initial funding and
construction began in 1993.
Next: The victims of Japanese aid
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