The administration of foreign aid in Indonesia, 1969/70-1982/83

At the time Indonesia proclaimed her Independence the concept of a Welfare State was already part of the ethos of Indonesian nationalism. This idea implicates the State Ideology \Pancasila\" which was incorporated in the last paragraph of the preamble of the 1945 Constitution. Welfare for the entire people particularly refers to the principles of Social Justice. To achieve this the government has launched many development programmes. In particular since 1969/70 the New Government has implemented a series of Five Year Development Plans (Repelita). These provide directives for general development based on priorities to be achieved. Each concrete programme however is formulated in the development project section of the annual budget. The implementation of these programmes has not been easy. It has required not only skill and expertise in various sectors but also considerable funds. Because domestic resources were insufficient to create savings to finance economic development it was clear that foreign aid was: needed. The success of the stabilisation programme and the rate of early economic progress improved the international credit rating of Indonesia and much more aid was given. With the increase in the amount of foreign aid received one of the arguments which emerged was whether the existing administrative structure was capable of coping with the overall programme. Clearly foreign aid itself is not a panacea for economic development if it is not used properly. The existing administrative structure the bureaucracy and the availability of qualified personnel all play an important role in determining the effectiveness of foreign aid. The main aims of this study is to examine the administration of foreign aid in Indonesia. Particularly the way in which foreign aid has been administered in order to achieve development goals. So that the administration of foreign aid can be understood it will also be necessary to briefly discuss the role of foreign aid in the economic development of Indonesia. This is reflected particularly in the changes in its relative position as a proportion of total development spending. Because the total scope of the administration of foreign aid is very broad this study will be limited to the administration of foreign aid in those government sectors which are administered under the directive of the Coordinating Committee for Foreign Technical Cooperation (Panitia: Koordinasi Kerjasama Teknik Luar Negeri = PKTLN). Particular emphasis will be given to the experience of the Indonesian Institute of Sciences (Lembaga Ilmu Pengetahuan Indonesia= LIPI). Government publications and other reports as well as individuals interested in:foreign aid are used as primary sources to illustrate the contribution of foreign aid to National Development. In analyzing the available material a descriptive approach will be applied throughout the study. The overall structure of the thesis is arranged as follows: Introduction Chapter I Development and Objectives of Foreign Aid Chapter II Foreign Aid and National Development 1969/70 - 1982/83 Chapter III The Administration of Foreign Aid Chapter IV Profile of the Indonesian Institute of Sciences (LIPI) Chapter V Conclusions Chapter I deals with the development and objectives of foreign aid in general. This is discussed both theoretically and in terms of what was actually happening in Indonesia. In theory foreign aid is needed either as a supplement to or substitute for domestic funds. The basic expectation in Indonesia is that foreign aid is a supplement to domestic funds albeit this only occurred after the last year of Repelita I. Chapter II of this study will firstly provide background information especially about political changes and problems faced during the first three years of the New Order Government. It is followed by discussion about government policies particularly Repelita (Rencana Pembangunan Lima Tahun = Five Year Development Plan) which lead to the achievement of development goals. Finally the discussion will canvass the role of foreign aid in national development because foreign aid constitutes a relatively large proportion of development funds. Chapter III examines the administrative setting of foreign aid. It will include discussion about the official channels for securing foreign aid namely active and passive processes. Every year the government proposes foreign aid to donors. Consequently and in many cases without waiting for an official offer project proposals have to be prepared by the executing agency. In some cases donors may offer such funds only for a particular field and therefore specific project proposals will only be made after the offer is received. These two techniques however follow the same cycle. Chapter IV discusses the tasks and functions of the Indonesian Institute of Sciences (LIPI) particularly its administrative structure and the way in which contribute to the national development effort. The key constraints on the achievement of development goals in Indonesia as in other developing countries are inter alia an inadequate budget for science and technology; dearth of qualified or skilled scientists and technologists. Further existing science and technology activities may not support development endeavours. This poses a dilemma as science and technology can provide important inputs to decision making processes in particular how to find a short cut in the achievement of development goals. Chapter V the last chapter will summarise the more important findings of the study. It will show that foreign aid in Indonesia has played an important role in achieving development goals. For example during the stabilisation periods and the first four years of Repelita I it was indispensable. The administration of foreign aid has greatly affected the quality of the foreign aid implementation .process. This is partly because the aid administration process is so lengthy both in donor and recipient countries. The shortening of the administration of the aid processes could provide a basis for simplification leading to greater efficiency and should bring about improvement in the quality of implementation. On the other hand great centralisation and heavy administrative burden will continue to consume time and energy. As a result it would disturb the overall aid implementation process and greatly hamper its effectiveness."