Letter: Why the US package is good for RI

Sat, 11/07/2009 1:02 PM  |  Reader's Forum

Most people have read or heard about the financial problems in the world these days and, especially in the United States. The United States leads the news in this area simply because of the staggering amount of money being allocated for stimulating the American economy.

In 2008, at the end of the Bush administration, the "Troubled Asset Relief Program", or TARP, was enacted into law. The goal of TARP was to stabilize the American financial sector. The amount of TARP was US$700 billion and it was used to bail out troubled banks, invest in and support the auto industry and, in general, strengthen the financial sector.

After the election of President Obama, the "American Recovery and Reinvestment Act of 2009" was passed into law by the American congress in February of this year. This "stimulus package" totaled $787 billion and was based largely on proposals made by President Obama and was intended to provide a stimulus to the US economy in the wake of the economic downturn.

With all that spending, the estimate is that, as of the end of August 2009, only 20 percent of the total money of the stimulus package has been spent and there is talk of a second stimulus package.

A little-publicized fact is that most of the American donor organizations, as well as various US government agencies, have had their budgets significantly increased with the stimulus package. In the past month, the United States Trade Development Agency (USTDA), the American Import/Export Bank (Bank ExIm) and others have all been here in Jakarta setting the groundwork for returning to Indonesia. It may be coincidental that many of the agencies who pulled out of Indonesia during the Asian financial crisis in 1998/99 now want to return but most people can put two and two together and figure out that they have a lot of money to spend and since Asia, and especially Indonesia, look very good in recovering from the current worldwide downturn, they would like to invest in Indonesia.

In the pre-stimulus days of not so long ago, the donor community (World Bank, USAID, IFC and other American donors) spoke in terms of getting the "most bang for their buck" or the maximum assistance for the widest range of people, cross sector if possible. Now it is "find me the biggest project I can fund" simply because they have literally billions more to spend this year than they did last year.

Using the 787 billion figure, let's say that politicians in Washington are scrambling to find a way to spend some of the 80 percent which has not yet been spent and let's say that someone in Congress or the State Department or from the White House itself says "let's spend some of this money on overseas development". Helping the world helps the US economy in the near future. So, let's approve 5 percent of the stimulus for our overseas activities. At 5 percent that figure is approximately $40 billion. There is, of course, no way to prove any of that, but it is clear that American donors are now awash with funds they are mandated to loan/grant or otherwise get rid of. I have no idea whether the 5 percent is accurate; it could be 15 percent, I'm simply making a guess.

In the pre-stimulus days of last year, it was relatively difficult to get loan or grant approval for projects simply because of the lack of money available, it had to be spent wisely and with the most impact. That has mostly gone, with donors now under pressure to provide as much funding for projects as possible within the new guidelines of the Obama administration.

This means if you have a "green" project, the chances of getting it funded are much better than a logging project (unless the project is re-growing the rain forest!).

This is a relatively small and short in time frame window that is currently open and, given the tortoise-like speed we tend to move here in this great country, the opportunity could come and go before we even get started.

John Fenton
Jakarta

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