Officials and local mass media cited the aspects of national ownership and leadership of all foreign loan-funded projects in Indonesia as the most important elements of the Jakarta Commitment agreement the government and 22 sovereign creditors and multilateral agencies signed last week.
"While in the past we, as the borrower, had a very weak bargaining position and often had to accept the terms and conditions dictated by the donors, this agreement puts us on a equal footing with them," Finance Minister Sri Mulyani Indrawati said after the signing of the agreement.
The agreement, which is based on the 2005 Paris Declaration on foreign aid effectiveness, also requires creditors or donors to untie their loans and align them with Indonesia's national development strategies.
As Indonesia has now become a middle-income country and foreign borrowings account for a mere 5 percent of its total spending, its relationships with its donors have been changing from an aid model to a development partnership. The relationships are thus led by the Indonesian government, as they should be.
The agreement itself, like the Paris Declaration, is a backlash from an aid recipient or borrower -- as Indonesia is -- against the plethora of donor-driven initiatives which conflicted with one another and had unrealistic conditions which were at odds with Indonesia's development priorities.
The rationale of the provisions is that for aid to become truly effective, stronger and more balanced accountability mechanisms should be in effect for both parties (creditors and borrowers). At present accountability requirements are often harder on borrowers than donors, yet aid is more beneficial when borrowing countries exercise strong and effective leadership over their development policies and strategies.
However, the guidelines on national leadership and ownership are only some of the more than 55 major points of partnership commitments between creditors and borrowers stipulated in the agreement.
Yet more important for the government to realize is the blunt fact that the Jakarta Commitment pact is not a blank check for using foreign loans. The agreement instead requires best practices of good governance for foreign loan-financed projects.
The agreement lays down comprehensive programs of action for both creditors and borrowers in order to improve the quality of aid (loans) and their impact on development through high standards of transparency, mutual accountability and the improvement of public financial management and procurement systems.
The Jakarta Commitment requires the strengthening of Indonesia's capacity to develop, implement and account for its policies to its citizens.
The crucial importance of accountability and good governance in project or aid implementation was amplified last week by the World Bank, one of the signatories of the Jakarta Commitment and Indonesia's largest creditor.
The World Bank last Wednesday debarred seven companies and one individual from bidding on contracts or projects after its internal investigative audit discovered collusive practices on a road project the bank funded in the Philippines. The creditor took this firm measure despite national ownership and leadership of the World Bank-funded project by the Philippines.
