| PROJECT APPRAISAL
|
| |
| (i) Aid and Trade Provision Projects
|
| |
| C&AG's Report, Fig 2
| 12. Three of the seven projects highlighted in the Comptroller and Auditor General's report were supported by the Aid and Trade Provision: the shortwave radio transmitters; the radio studios rehabilitation; and the Ombilin coal mine projects.
|
| |
| C&AG's Report, paras 1.1-1.3 and 1.7
| 13. A consultant from the BBC's Transmission Engineering Department reported that the proposal by Marconi Communications Systems to build shortwave radio transmitters was technically sound and cost effective; and that, with appropriate training, local staff could operate and maintain the proposed system. The consultant considered that the cost of the production and installation of the transmitters was not unreasonable but that more information was needed to make a full assessment of value for money.
|
| |
| C&AG's Report, paras 1.8-1.12
| 14. The Administration assessed the developmental soundness of this project to a lesser extent and rigour than other projects funded from the bilateral aid programme, as was customary with Aid and Trade Provision projects at that time. The likely commercial and industrial benefits of the project were assessed by the Department of Trade and Industry. They envisaged the project would fill an imminent gap in Marconi's order book and expected it to provide a stepping stone to future export prospects.
|
| |
C&AG's Report, paras 2.1-2.2
para 2.4
| 15. The Administration had little time to influence the design or scope of the project which provided for 24 radio studios to be built in replacement of the 13 lost in a fire. They did not seek, at the design stage, to verify Radio Republik Indonesia's assessment of its future needs, or the level of specification for the equipment. The developmental case for replacing the studios noted that radios were listened to widely in Indonesia; they played an important part in keeping the people in touch with the government and in uniting a disparate and far-flung organisation, and had an important role in education.
|
| |
| C&AG's Report, paras 40 and 2.5
| 16. The British Embassy in Jakarta felt that follow-on business from the aid project could be vast. They recommended that a good offer of aid needed to be made quickly as the disappointment to the government of Indonesia would be correspondingly great and could affect a number of interesting pieces of business likely to come to the UK. These included both potential defence and normal commercial sales.
|
| |
Qs 4, 189 and 192, Q 254
Qs 205 and 248
Q 15
Q 58
Qs 250 and 257
| 17. The Administration told our predecessors that these representations from the British Embassy did not have any effect on their decision, which was taken on a rational and legal basis. There was no question of orders having been rushed through to secure defence contracts; at no stage had there been any linkage between any element in the aid programme to Indonesia and the sale of arms. Representations from other government departments were not unusual in the aid programme; the Administration were an attractive source of funds.
|
| |
C&AG's Report, para 7.2
para 7.4
Q 261
| 18. The Administration had little time to appraise the proposal to supply equipment for the Ombilin coal mine, the design having been substantially finalised before it was submitted to them. The Administration's appraisal considered the cost-effectiveness of the technology only briefly and did not include a detailed study of the costs. No institutional appraisal was carried out on the capacity of the implementing organisation. The Administration did not assess the adequacy of the design or the feasibility of the technology proposed. On the basis of a local small-scale feasibility study, reported by the implementing organisation, Perum Tambang Batubara, the Administration expected that production costs would be lower than importing coal. They therefore considered that the project passed their test for developmental soundness in force at the time.
|
| |
Q 31
Q 32
Q 102
Q 231
| 19. In evidence to our predecessors the Administration accepted that their appraisal mechanisms at the time were weak and superficial. There was inadequate time for them to consider the project and they had had to take the technical and economic appraisal on trust. There was no consideration of institutional, sociological and wider issues, and no probing of wider environmental questions. They had been naive about the commercial case. No visit was made to the project site and no mining adviser was consulted on the technical aspects. Adequate geological work would probably have shown that the conditions were not suitable for longwall equipment.
|
| |
Q 6
Q 70
| 20. The Administration told our predecessors that their earlier Aid and Trade Provision projects, like the Ombilin mine, frequently over-estimated and exaggerated the likely commercial benefit. Some of the appraisals were superficial. Because the mechanisms were less rigorous than for other projects, the Aid and Trade Provision was attractive as a source of commercial finance. There was now a more structured and a more rigorous appraisal of the industrial and commercial case.
|
| |
| (ii) Police Management Training
|
| |
| C&AG's Report, paras 3.1-3.3
| 21. The Administration's assessment of this project was based mainly on an initial survey by the UK's Bramshill Police Staff College. Project design was carried out solely by the College. The project was expected to contribute towards the strengthening of public administration and to provide management training and development in a key Indonesian public authority.
|
| |
| C&AG's Report, paras 40 and 3.4
| 22. The Foreign and Commonwealth Office hoped that Indonesia would look to the UK for further defence equipment purchases, while recognising that the benefits of the project were not entirely on the Indonesian side. The police were closely integrated with the military establishment and the Foreign Office considered that delays in implementing the project would hardly have a favourable impact on the former Chief of Police, who had moved on to become a Presidential adviser and was likely to play a crucial role in decisions on future military procurement.
|
| |
Qs 189, 204 and 256
Q 205
| 23. The Administration told our predecessors that the representations from the Foreign Office, while a proper concern on their part, had no impact on the Administration's decision. This was taken on a rational and a legal basis.
|
| |
Q 178
Qs 206-7
Q 35
Q 37
Q 121
Q 36
Q 194
| 24. The Administration said that the Indonesian police, while having military ranks, were a distinguishable civilian force from the Army; they had a different purpose, different chains of command and different management. But they did have a relationship with the military at the top level. Successive internal policy guidance notes had confirmed that the previous Government's Ministers regarded it a proper part of the aid programme to support non-military security organisations, such as police forces. The Administration stressed that the previous Government's Ministers regarded the Indonesian police as a civilian force. They were entirely aware of the connection with the armed forces.
|
| |
C&AG's Report, para 3.3
Q 2
Qs 125-6
| 25. The developmental benefits of this project were seen as the encouragement of the Indonesian police towards community policing in terms of improved human rights. The Administration told our predecessors, however, that the direct objective was to improve management capacity, including better acceptance of the doctrine of community policing; human rights were intended as an indirect rather than a direct benefit. They said that, since 1979, the previous Government's Ministers had required them to give careful consideration to human rights.
|
| |
C&AG's Report, paras 3.6-3.7
Evidence, Appendix 1, p 31, para 3.12
Q 64
Qs 138-9
Evidence, Appendix 1, pp 27-33
| 26. Between 1983 and 1987 around 350 Indonesian police officers were trained at Bramshill. Because of reports of civilian killings in Indonesia and uncertainty as to the possible complicity of the Indonesian police, the Home Office insisted on the gradual withdrawal of Bramshill's involvement in the project. The emphasis was changed to in-country training by a consultancy firm consisting of a former Bramshill training officer, who had retired from the police, and a management consultant, brought into Bramshill to assist with its training courses. This contract was placed without competition. The British Embassy in Bangkok later expressed surprise at the size of the consultancy fees. The Administration assured us that they were satisfied with the consultants' performance and that their costs, of £43,600, were not out of line with management consultancy costs generally.
|
| |
C&AG's Report, para 3.9
Q 49
Qs 186-7
| 27. In 1990 there were reports of a deterioration in the human rights situation in Indonesia, with a number of civilian executions taking place. A second phase of the project was nevertheless approved. The Administration assured us that the views of the Home Office had carried considerable weight; the previous Government's Ministers had explicitly approved the transfer of training to Indonesia and its second phase.
|
| |
| (iii) Mapping Projects
|
| |
C&AG's Report, paras 4.2-4.3
para 4.6
| 28. The aim of the Regional Physical Planning Programme for Transmigration project was to improve settlement site identification in the first stage of transmigration planning-the movement of people to those parts of the country which have potential for development, but which are under-populated. The Administration were able to influence the design and scope of the project. They believed that it would provide more accurate and detailed maps of Indonesia, as a result of which the selection of transmigration sites would improve.
|
| |
| C&AG's Report, paras 5.1-5.2
| 29. The aim of the National Overview of Land Resources project was to enable effective national resource planning decisions to be made on the basis of more summarised data than the Regional Physical Planning Programme for Transmigration had produced. The Administration saw the developmental benefits as the promotion of better informed national resource decisions, thereby contributing to Indonesia's long-term development.
|
| |
C&AG's Report, para 6.2
paras 6.4-6.5
| 30. The Regional Physical Map Improvement and Training project was mainly to provide workshop training across Indonesia, including East Timor, but excluding Jakarta, and training seminars to central departments in Jakarta. The Administration's appraisal concentrated on the technical output of the two earlier projects and how best to disseminate the results. By making land-use planners aware of the data available, the project was expected to make a direct contribution to Indonesia's development objectives.
|
| |
| (iv) Legal Aspects
|
| |
1980 Ch 63
C&AG's Report, para 9
Q 8
| 31. Under Section 1(1) of the Overseas Development and Co-operation Act 1980, the Secretary of State is empowered to furnish assistance to any person or body for the purpose of promoting the development, or maintaining the economy, of a country or territory outside the UK, or the welfare of its people. Projects must be for the purpose of promoting development, as indicated by the judicial review of the Pergau Hydro-Electric project. The Administration were not aware of any notes of dissent having been submitted to Ministers on the Indonesian projects examined by the National Audit Office.
|
| |
C&AG's Report, para 31
Qs 211-213, 259
Evidence, Appendix 1, pp 27-33
Q 111
Q 7
Qs 218-9
Q 216
Qs 223 and 226
| 32. In each of the cases examined by the National Audit Office the Administration were satisfied that there was potential developmental value when decisions to proceed were taken. They were satisfied that their support for all seven projects was within the terms of the 1980 Act. None of the aid was directed to East Timor though the Administration recognised that radio broadcasts put out by one of the transmitters could be heard there; in addition it was undeniable that the mapping projects did not exclude East Timor. The Administration emphasised that the policy was not to have projects specifically directed at East Timor; Ministers of the previous Government had not declared a policy that no aid to Indonesia should have any incidental effect there.
|
| |
| Evidence Appendix 1, pp 27-33
| 33. In 1996 the Administration took advice on the legality of providing aid which might be used in East Timor; and on the legality of aid for the National Police Management project. On the first issue, Counsel advised that the Secretary of State might lawfully give aid in such circumstances. On the Police Management Project Counsel advised that assistance to the Indonesian Police Force, which included improving management performance and introducing concepts of community policing, was a proper purpose within Section 1 of the 1980 Act. The uneven human rights record of the Indonesian Government was not such as to subvert the basic development purpose of the aid.
|
| |
| (v) Conclusions
|
| |
| 34. 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.
|
| |
| 35. We regard the Ombilin coal mine project as a particularly serious illustration of the Administration's failure to undertake a sound appraisal of the 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.
|
| |
| 36. 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.
|
| |
| 37. 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.
|
| |
| 38. 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 developmental purpose of the aid.
|
