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| The Committee of Public Accounts has agreed to the following Report:
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| AID TO INDONESIA
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| INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
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| C&AG's Report (HC 101 of 1996-97), paras 1 and 2
| 1. Indonesia consists of over 13,600 islands and in 1995 had the fifth largest population in the world. It consists of 27 provinces, including the former Portuguese colony of East Timor which Indonesia invaded in 1975. The UK Government has not recognised this annexation and has been supporting the efforts of the UN Secretary General, Portugal and Indonesia to find a settlement.
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C&AG's Report, para 4
Fig 2
| 2. Since 1982 the Overseas Development Administration (the Administration), now the Department for International Development, have spent £192 million on aid to Indonesia. When debt relief and Commonwealth Development Corporation investments are included, Indonesia was the fifth highest recipient of UK aid in 1994-95. On the basis of a report by the Comptroller and Auditor General, the previous Committee took evidence from the Administration on their management of the assistance they have provided to Indonesia, with particular reference to the seven projects highlighted in the Comptroller and Auditor General's report. On the basis of our predecessors' enquiries, our main conclusions and recommendations are as follows:
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| On Indonesia's place in the aid programme
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| (i) The Committee note that the Administration consider there is a strong case for maintaining the current level of UK aid to Indonesia on social, economic, political and commercial grounds. We also note that the World Bank regard Indonesia as the world's top performer in addressing poverty; that its Gross National Product per capita rose from less than $700 in 1989 to $880 in 1994; and that, per capita, a number of other countries receive more UK aid than Indonesia (paragraph 10).
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| (ii) At the same time we share the concern of the previous Government's Ministers that Indonesia's record on human rights is unsatisfactory. We therefore look to the Administration to ensure that the Government's decisions on the level of aid provided to Indonesia are taken using current information on all the relevant factors, including Indonesia's level of poverty, its creditworthiness and its government's record on human rights issues (paragraph 10).
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| (iii) We note that a relatively high proportion of the assistance provided to Indonesia is given under the Aid and Trade Provision because that country is an interesting market for British products. We note that Indonesia qualifies for such assistance because its Gross National Product per capita in 1989 was below the level of $700 set by Ministers (paragraph 11).
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| On project appraisal
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| (iv) We are concerned that the Administration's appraisals of projects financed under the Aid and Trade Provision before 1993 were superficial. We note the Administration's assurance that the representations made to them by the Foreign and Commonwealth Office, and by the British Ambassador in Jakarta, about the potential benefits to defence and other UK business, had no impact on their decisions about the provision of aid; and that these decisions were not rushed through in order to secure defence contracts (paragraph 34).
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| (v) We regard the Ombilin coal mine project as a particularly serious illustration of the Administration's failure to undertake a sound appraisal of aid proposals. We consider it unsatisfactory that on this project a third party's appraisal was taken on trust, expert advice on the key matter of the suitability of the proposed equipment to the geological conditions was not sought, and there was no consideration of institutional, sociological and wider issues. We note the Administration's evidence that they have brought their arrangements for appraising Aid and Trade Provision projects into line with those applying to other aid projects (paragraph 35).
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| (vi) In the case of the police management training project we note that the developmental benefits were seen as the encouragement of community policing in terms of improved human rights. In the Committee's view this intention would have been more effectively realised had the project's objectives been expressed in terms of addressing human rights issues instead of focusing them on the improvement of the Indonesian police force's management capacity (paragraph 36).
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| (vii) We note that the Home Office expressed strong concern at the involvement of Bramshill Police Staff College in view of reports of civilian killings in Indonesia and the possible complicity of the Indonesian police; and, that for this reason, the previous Government's Ministers approved the transfer of this training from the UK to Indonesia, where it was carried out by a firm of consultants. We are concerned that the contract for this work was placed without competition. We note the Administration's evidence that they were satisfied with the consultants' earlier work; and that the contract price was not out of line with management consultancy costs generally (paragraph 37).
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| (viii) We note that the Administration took steps to satisfy themselves that each of the projects our predecessors examined was lawful under the Overseas Development and Co-operation Act 1980. More specifically we note the Administration's legal advice that the uneven human rights record of the Indonesian Government was not such as to subvert the basic development purpose of the aid (paragraph 38).
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| On project implementation and impact
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| (ix) We are concerned that there were delays in the utilisation of the radio studios provided with support from the Administration until sufficient demand had built up and until staff had been properly trained. We consider that this points to there having been inadequate management of the project. We are concerned, too, that a consultant employed on this project not only failed to concentrate on critical tasks but was paid more as a result of this deficiency. Although this consultant's bid was still cheaper than the next lowest, the Administration's experience illustrates the risk in accepting a low offer without first checking on the bidder's capacity to deliver (paragraph 52).
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| (x) We regard the outcome of the Ombilin coal mine project as particularly disturbing: it engendered a negative economic return and therefore will have had an adverse effect on those whom it was intended to benefit. Not only was the equipment provided for the project expensive, it was also unsuitable. We consider that its visible lack of use is not a good advertisement for the UK aid programme or for British industry. We agree with the Administration that this project was a serious failure (paragraph 53).
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| (xi) We regard the achievements of the police management project in the promotion of community policing as disappointing in that the improvements appear to have been confined mainly to better procedures for receiving people and for dealing with driver and vehicle licensing. We note the encouraging report by UNICEF's representative concerning the attitude of the Indonesian police to women's and children's issues and the Administration's evidence on the better police handling of youth disturbances in South Jakarta, but it is not clear that these improvements stem from this particular aid project (paragraph 54).
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| (xii) We are pleased that the Administration regard themselves as a learning organisation. We consider that these projects illustrate the real need to put into practice the lessons they say they have learned as set out in paragraph 51 of this report (paragraph 55).
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