| INDONESIA'S PLACE IN THE AID PROGRAMME
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| (i) Justification for Aid
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| C&AG's Report, paras 3 and 4
| 3. The Administration consider Indonesia a relatively poor country and that a strong social, economic, political and commercial case exists in the medium term for maintaining the level of aid provided. According to the World Bank, the proportion of the Indonesian population living in poverty reduced from 60 per cent in 1976 to 15 per cent (some 27 million people) by 1990. The World Bank recorded its gross national product in 1994 as $880 per capita, ranking it the 55th poorest country in the world.
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| Q 1
| 4. Our predecessors put it to the Administration that there were 54 countries in the world poorer than Indonesia; yet it was the fifth largest beneficiary of UK aid. The previous Committee asked why the Administration did not target their aid more on those with the greatest need. The Administration said that, excluding the Aid and Trade Provision and investment from the Commonwealth Development Corporation, which were untypical elements of British aid, Indonesia ranked 21st in their list of aid recipients. Even though the World Bank judged that country to be the world's top performer in addressing poverty, Indonesia still had a substantial population living on less than one dollar a day-roughly the same as the population of Kenya and Tanzania together, who live in comparable poverty.
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Q 196
Q 240
C&AG's Report, para 24
| 5. The Indonesian Government have secured a long period of sustained good financial management, as a result of which poverty has been addressed, and have secured near universal primary education and improved health standards. At the same time the previous Government's Ministers regarded Indonesia's record on human rights as unsatisfactory. Their specific concerns included extra-judicial killing; the suppression of political opposition; restraints on freedom of speech, on freedom of assembly and on freedom of association; a lack of progress towards democratic institutions; and a high level of corruption. Those Ministers decided, nevertheless, based on the evidence available to them on the observance of human rights, to continue to provide aid to Indonesia.
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| (ii) Aid and Trade Provision
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C&AG's Report, paras 5 and 14
Qs 12-13, 71 and 109
| 6. Since 1986 five Concessional Loan Arrangements have been signed with Indonesia under the Aid and Trade Provision to a contract value of £465 million. The Aid and Trade Provision is a separate allocation within the bilateral aid programme. It is designed to support projects of commercial and industrial benefit to to the UK which might not otherwise find a place in the programme. Projects must be of developmental value and be as good as those funded out of the rest of the aid programme; and the recipient country must be creditworthy and its per capita gross national product must be below a pre-determined level.
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| Q 13
| 7. The Administration told our predecessors that Indonesia qualifies for Aid and Trade Provision assistance because its gross national product per capita in 1989 was below the $700 level set by Ministers. That figure is subject to periodic review, but there is no income level that would automatically trigger Indonesia's exclusion from assistance under the Aid and Trade Provision.
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Qs 105-6
Q 110
Q 11
| 8. Currently Indonesia accounts for nearly £29 million out of a total Aid and Trade Provision budget of £70 million. It is quite a high recipient from that budget because it is an interesting market for British products. In the first nine months of 1996 the value of British exports to Indonesia was around £650 million.
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Q 104
Q 34
| 9. The Administration pointed out that Indonesia is nevertheless a rather modest recipient of UK aid by comparison with some other countries, even when taking account of other assistance from the aid programme, Commonwealth Development Corporation investments and debt relief. Including all these forms of aid, Indonesia receives 19 pence a head from the UK against 40 pence in Bangladesh and £1 in Kenya. Compared with the UK, Japanese aid to Indonesia was at the rate of £2.98 a head, from Australia it was 36 pence, from Austria 32 pence and from France 29 pence.
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| (iii) Conclusions
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| 10. The Committee note that the Administration consider that 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. 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 levels 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.
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| 11. 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.
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