DIVISION OF THE HUMANITIES AND SOCIAL SCIENCES CALIFORNIA INSTITUTE OF TECHNOLOGY PASADENA, CALIFORNIA 91125 A CONVERSATION WITH BERNARD BELL, II WASHINGTON, D.C. January 28, 1988 © Robert Oliver ~,~_;,\lUff OF" \\"" l'.t; ~... ~ q, <:t ~ . !§ ~ '0 "' -< ~A-flc:- (i~~~~ \ ~ ~ ;!'It ~-( S#fAtl M~~ CONVERSATIONS ABOUT GEORGEW~ODS AND THE WORLD BANK 2 a program they planned to present to the president and the parliament. They A CONVERSATION ~ITH BERNARD BELL, II asked me and Bill Cates to sit in on discussions with them, which I did. {I will tell you more about Bill later.) On my last day there, they said that ~ASHINGTON, D.C. they would like the Bank to help them by establishing a resident staff in Indonesia which could help them in formulating an overall program and Janua~y 28, 1988 developing specific projects -- in general serving, in effect, as part of their staff. They asked me if I would present that as a formal request to the Robe~t W. Oliver Bank. I said I would. They then asked me if I would be willing to head the staff myself. I said that it wasn't possible for a whole variety of personal reasons. I came back to ~ashington and wrote a memorandum which presented their OLIVER. Mr. Bell, it Is. a great pleasure to have you back and to make up for request. This memorandum was acheduled for discussion by the Loan Committee, lost time in this adventure. I wonder if you would begin by explaining then the top body of the Bank. In the course of that discussion, all members something of your singular relationship with Hr. McNamara at the time of of the Loan Committee except two were enthusiastically in favor of meeting th~ Indonesia. Indonesian request. The two who were opposed were Burke Knapp, who was the BELL: Maybe I should start by going back co March of 1968, just prior to the senior vice president of the Bank, and ayself for entirely different time that HcNama~a took office aa President of the Bank. I waa at that time reasons. He was opposed because he thought that it might detract from the Deputy Director for Economics in the Projects Depart.ant. I hadn't travelled responsibility and authority of the Washington office, and he was opposed to anywhere for several years, and Mr. Aldewereld and Hr. Chadenet, who were my that. I argued against it on tWo grounds: first, that Indonesia had such a chiefs there, kept urging me to take a trip somewhere, anywhere, and deal with terrible reputation at the time as a place to live that none of the good several matters that were outstanding with a number of countries. I agreed to people on the Bank staff would be willing to go, and, unless the very best do that. I said, among other things, that I would like to go to Indonesia, people in the Bank went, it would be a mistake because the Indonesian team which I had last visited in September of 1963. would be far superior and wouldn't learn anything fro~ them; and second, that I went to Indonesia for four or five days and, in the course of that the ~ashington bureaucracy would try to prevent the staff in Indonesia from four or five days, the Indonesian economic team was discussing the outlines of exercising the independence and authority it would need to be effective. ) 4 Burke said that he thought that he and I should have a private discussion with handicapped people, especially handicapped children ·- either physically or McNamara and tell him why we had opposed the .ajority reco~endat!on to the psychologically handicapped, and Boston University had a very good faculty In committee. He would let me know when we could do that. this area and a very good curriculum. She wanted to go there. but her had never met McNamara up until that time. A few days later Burke academic record was not particula.rly brilliant. The first reply fro111 Boston called me and said, M~e don't need ro have a discussion." He had already had University to her 1n1t1al letter of application had been somewhat it himself. I said, "Well, O.K.• And aas~d the proposal was dead, though discouraging. I felt I wanted to stay here and help her actually to get in. probably for the wrong reasons. Several daya after that, Hr. Aldewereld, who McNamara (this will tell you something about him) picked up the phone was the head of the Projects Department, called me and said, "Hr. McNamara and said to his secretary, "Get me Eunice" -· that was Eunice Kennedy. She wants to see you at 6:00 this afternoon.• I asked what about. He said he did. I could hear his end of the conversation and guessed the other end. l!e didn't know. So 1 went. That was the firat ri-. I had met HcN&Q4ta. He told said, "Eunice, I know you are very busy packing because you and Sargent are me that he was very much in favor of rhe recomaendation which the Loan leaving to1110rrow." (Sargent Shriver, her husband, had just been appointed Co~ittee had made, that a resident staff be established with w1de Ambassador to France.) "But there is something I want you to do. There is a responsibility. He wanted me to head it and asked if I would. I said, "No," little girl who wants to get into Boston University and her chances don't look and he said, "I want you to think it over, but just offhand without any very good." There vas •o•e more conversation. Then he hung up and turned to commitment on your part, could you tell me some of the reasons.~ me and said, "Well, that'• settled, she's ln". That was McNamara. I ce.n't I told him that I could think of about 8 reasons offhand, four of recall what my othe~ tWO personal reasons were. In any case he had an answer which were entirely personal and four related to the way in which the Bank for those. operated. He asked if I could tell him what they were, and I mentioned that Then I said, "On the side of che of the Bank, the Sank ts a highly on the personal side both my wife and I had elderly mothers who were ill, and Washington centralized opera.tlon. I know from experience as Deputy Director we didn't think that this was a ti.a we wanted to be away. To which he said of the Projects Department that many depart~ents in Washington consider it •Well, you and your wife can make as many trips back here at Bank expense as their religious duty to ignore or contradict any recommenda.tion n~ade by field you feel are necessary to take care of that." That answered that. staff, and that would continue and be a constant struggle, which would be a Then 1 said another reason was that I had a daughter who had just waste of time." That was the point at which he sa.id, "I have dealt with completed her first two years of college in the Washington area and wanted to bigger bureaucracies than this one and I can take care of that. I will rule transfer to Boston University because she was interested in working with that no one in the Washington office can ignore or controvert in ":ny way any 5 ' decision or recommendation of the Jakarta office Without my personal During his defense department tenure, among other things, his children, approval. I said 1 thought that might work. It certainly did. There were to strongly disagreeing with US Government policy on Vietnam, refused to speak to my memory only two or three instances in four years in which anybody in him, which didn't help. Vashlngton went to him to try to get hia approval of their disagreement with Indonesia was clearly one of his main interests when he came to the the resident staff. On one of those occasions he agreed with them, and on the Bank and this influenced his decision to establish a reside~t staff in others he did not. In any case it scared them sufficiently so that they response to Indonesia's request, although I'm quite aura he had this in mind rarely ignored or disputed our recommendations that went to him. even before the request came. He had been President of the Bank for OLIVER: Uhy was Indonesia such a special case? approximately one month and it was almost the first action he took aside from BELL: That's an interesting question about which I have speculated quite a routine ones. lot. I haven't wanted to ask KcNam.ra that directly. For one thing, the Bank When I mentioned another one of my organizational objections, namely had totally neglected Indonesia. The Bank's only connection with Indonesia that I thought •any good people in the Bank would not be eager to go to was that, sometl•a in the late 50s, it had sent an economic mission to Indonesia, . Indonesia which prepared in ~aahington a report which was duly put into the OLIVER; Hay I stop you for just a •inute to ask whether or not McNamara, in files. I don't know Whether anybody aver read it; cettainly nothing came of your opinion, had already decided that he had to have a directly reporting it. McNamara felt that this waa the fifth largest country in the world, reeident mission in Indonesia, or wee this vary m~ch tied up with you, anxious for economic and social progress, and that the ~orld Bank couldn't yourself? ignore it. BELL: I think, although I have never confirmed this with him, that he had in I've also speculated that there is a connection between his interest fact decided, even before the Indonesia request came to him via the Loan in Indonesia and his feeling about Viet Ham. I hesitate to say this, but I Committee, that the Bank needed to establish a resident staff in Indonesia, will to you. I've said it to ala1ost no one else. In part I think there was that the Bank knew nothing about Indonesia, and that the only way that it a kind of expiation on his pert for what he now regarded as his earlier co~ld effectively assist Indonesia was with a staff of people on the ground mistaken views about Viet Ham. Viet ·Nam was a very painful thing for Uhether he had also decided that he wo~ld strengthen the authority and McNamara. He clearly changed his mind at some point about what the US should responsibility of that staff by making it report only to him, I have no idea be doing vis-a-vis Viet Ham. It was that change of mind which, I believe, led He may have had some such idea, but I am sure it was strengthened by my saying to his leaving the US government and becoming the President of the World Bank. that it would be extremely difficult for the staff to be effective when all 8 ' the departments in Yashington would consider it their religious duty to Indonesia case, McNamara was thinking in operational terms. For the Bank disagree with anything that was recommended and would consider it an insult to effectively to assist the Indonesians, there had to be a staff on the spot ' have any authority placed in that staff. think he was quite right about that. OLIVER: Was this particularly true of the Projects Department or was it OLIVER: Well, how did it work out in practice? across the board? &ELL: Hy judge.ant is that it worked extremely well. We we~e fortunate in BELL: It was across the board. that the economic team [the economic ministers] in Indonesia consisted of OLIVER: Well, I interrupted you. people, some of whom 1 knew and had known for some time and some of whom I BELL: I was saying, I think, that I thought it would be difficult to assemble didn't know but who did know that I had worked for several years as an advisor the quality of staff that was needed, partly because many people would be to Dr. Djuanda, who had been the prime minister of Indonesia for some time In unwilling to reside in Jakarta and partly because their superiors would refuse the latter years of the Sukarno regime. He was called the first minister to release them for that purpose. He said, ~I'll taka care of that. I will because Sukarno liked to call himself both President and Prime Minister. but rule that anybody you want to go on that staff and who wants to go goes, no Dr. Juanda was the Prime Minister. Dr. Juanda was a man who was tremendously matter what his department head thinks. Nobody can stand in the way of that. able. He was highly respected by the young economists in Indonesia, including I said I thought that would help on that score. ln any case, within about a the entire economics faculty of the University of Indonesia who were totally week after that first discussion, I agreed to go, and then proceeded to select proacribed by Sukarno: everybody in the government of Indonesia was forbidden staff. Why McNamara asked -a, I really don't know. He may have heard from to talk to those people. many people around the country in universities and foundations, that one of Unknown to Sukarno though, the general who was in charge of their the few people in the Bank who bad any working experience within Indonesia was staff college, the equivalent of Wear Point, had these people lecture at his me. That may be the whole answer to that. I had bad experience with staff college. He kept it quite secret. Djuanda had a number of ti~es Indonesia earlier, dating back to December 1949. suggested to me, when he had put problems before me, that 1 discuss my OLIVER: Well, and you had the experience in India of having run the Bell thinking about it with these people in the faculty of the University, but keep Mission. This was a very special case also. it entirely secret. "Never go near the University. Meet them at night B£LL: Yes, it was. It was really quite a different kind of assignment. The somewhere." I bad started to do so when the end of that advisory period tame India one was to make what George Woods hoped would be a more thorough study in September of 1963 with Sukarno's declaration of "confrontation. of the economic problems of India than had been done up to that time. In the It may be of interest that early that year (1963) Dr. Djuanda had a~ked • ' • • • ~ • • • • i• • • • ~ - - : g " - - - • 0 0 - • - • n 0 • ! • I n n • • - il n 0 0 ~ • • n • • 0 n • 0 [ • ;:. ' • g • il -• - 0 ! 0 • - 0 n n n • • • • • • ~ " • • • • • < " • ~ ~ .?. ! I '1 • n • • l • • ' • [ • • • • - -~ 0 0 • [ • " ~ • 0 " • i n • ~ l ~ ~ • • • g • • ~ • " 0 • • • • • n • • • ~ • • - • 0 • • i • 0 • • [ • & - n 2 " • ~ " - " • • 0 • 0 • • 2. I • • 0 - 0 i - • 0 ! n g • • " ~ ' • • 0 I • • - " • l ' 1 0 • " • '" • i - 0 • • ~ i. : - n ? ! • i. !• • - 0 • ~ n & ~ n i n ! 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' ~ 0 ~ t n • •n • i" 0 • - n ' ~ 0 0 - •'•• ' 0 n • • ! ' n • .:: n • • • • : i. i [" • • 0 0 l -•n l • & 0 0 • n • • • : • -• • • • • •" - n • [ •0 • - n• • • - • ~ • • • • ~ • • - " i n n n • • - • ' " 0 ! il l " 0 • - n • • n • 0 i • • - • • - • • • " • ~ • - • • • • - • 'n - • • 0 - & ~ 0 0 • I - n • • i " ! n 0 • •" " • " " " • • ' ' ' n 12 had begun to execute the progra~ which we had agreed on, Sukerno made-a speech independence. the lndon.,sian delegation called &ill Hartin, then President of in which he decreed confrontation with Malaysia, etc. He made that speech one Ex·lm &ank asking for a ~eeting. The next day he called back immediately night. came to the office, Dr. Ojuanda'a office, the next morning. He was agreeing. Two members of the delegation, Djuanda and Sumitlo flew overnight looking very dejected. He said to me, •you might as well go home, You'll be to Yashington and there applied for a loan of $100 ~lllion to help finance wasting your th•e if you stay here. It's finished.- 8eing a polyanna, l rehabilitation and the beginnings of develop~ent. &ill Cates, and I worked said, "\le can salvage some of this, can't we?• •t-~o, it's finished. Don't like mad to produce in a few days a learned report on the econo~ic situation waste your time, get on a plane and go home.• I did. Three months later Dr. and prospects of this newly independent country and ended it with a Juanda was dead. The official story ia that he died of a heart attack in the recommendation to the Board of Directors that the loan be made. It was, very course of a party at the Hotel Indonesia. His daughters, whom I know, promptly and for three years thereafter we did our best to provide the continue to tell me that that was no heart attack, that he was poisoned. I assistance and choice the govern.ent of Indonesia requested, much of it suspect, they are right. Sukarno and his then foreign ~iniater, Subandrio, unrelated to the Ex-Im loan. knew that Djuanda vas potentially their chief rival. They knew what 1 knew I have gone in to all of this by way of helping to explain why I thought that the top generals in the ar~y had asked Djuanda whether, if they took over the resident ataff operation, which McNamara started, waa very successful. to try to save the country, he would run the government for the~. I knew what mention all this to support one of the points I was going to make about why we his answer had been, which wss, •tf you fellas an ever agree among yourselves had been succeaaful, which was that from the very beginning the Indonesians and you can convince .a that you can command .ore than your secretaries, I'll trusted thia staff. They knew me or knew that I had a worked as a do it." confidential advisor to Dr. Djuanda for whom they had tremendous respect, They OLIVER; So the whole restructuring plan went out the window? thought that anyone whom Ojuanda wanted as his advisor was a good man for &ELL: Yes, totally. them. OLIVER: This helps explains why HcNa~ara requested you to take the job. You OLIVER; Including the army? were very interested since you already had prior experience in Indonesia. &ELL: Including the army. We had a good start for that reason, and I &ELL: Exactly. I was very much interested in Indonesia and I had been sine" ~anaged, with the help of HcNa~ara's decree chat nobody could scand in the way my first encounter with it in Oec.,~ber 1949. I was then the chief economist of somebody going to join the resident staff, to get a good staff. We had, of the US Export-Import Bank. On the day the Indonesians and the Dutch signed including myself, 10 professionals on that staff. From the very beginning w~ the final sgre.,ment terminating hostilities and recognizing Indonesian worked really as part of the government; we were, among other things, a 13 " principal means of co~unication between one ministry and anot~er. One of the was contractually due to be paid by the companies to Pertamina, would be notable things at that time (to some extent it ts still true) is that the retained by Pert. . ina. At that time most of the contracts provided that the various ministries and departments in the government of Indonesia didn't talk companies would pay aixty·flve percent of their profita to Pertamina. It was to each other very much. We ware, aaong other things, the channel of 60 of that 65, not 60 percent of the 65, but 60 out of the 65 which, under the co~unication. new law, went to the government. At the point where General Sutano and I OLIVER: They're all too busy. They all have ftve jobs I reached agreement, he said, ~Why don't you tell Wldjoyo that I haven't seen BELL; Many are very jealous of their own turf. That's less true than it was him for quite awhile. He and I ought to have lunch one day.~ I went back to at that time, I'll give you an S:Ka:lllple. I can't recall the year, it might Widjoyo's office, told him, and he said, "That's ridiculous. He and 1 haven't have been '69 or '70. A question arose in the government about an important ever talked to each other in our lives." Which waa true and illustrates the issue, which was whether the pay.enta by foreign oil companiea under their lack of communication in the government and our role in establishing it. production-sharing contracts with Pertamlna, the national oil c~pany, OLIVER: I assume that you induced some kind of devaluation along the way? belonged to Pert~ina or to the governaent. An interdepartmental co~ittee BELL: Yea. I might say, incidentally, and thla is important, the lMF had a was set up to discuss the question. It met and talked but got nowhere. Quite reaident representative at the time our resident staff began its operations. independently of that Wldjoyo recognizing that the issue had to be decided In fact, he had been there for several months by that time. He, too, was very between. himself as the leader of the team of economic ministers, and the much trusted and used by the Indonesians. He and 1 worked very closely General who headed Pertamina asked me to negotiate the question with General together. We were in continuous discussion with the Indonesian economic team Ibnu Sutano, who was the head of Pert~ina and with whom, for aome reason about what they should be doing in their trade regulation, exchange rates, which don't understand, I had a good relationship. We used to •eet several fiscal and monetary policy, etc., etc. times a week and talk about various things. We both smoked Lucky Strikes. l There wete several devaluations in the period that we were there, '68- think we were the only two people in the country who did. '72, and there was a unification of exchange rates. Several rates were in use Long before the committee reached any conclusion General Sutano and I, at the time in •68 when we started. There was a unification; there was a with Widjoyo behind me all the time, had reached an agreement on what the movement, as I recall, to a single rate of 420 rupiah co the dollar. That arrangement should be. It was incorporated into what was called the Pertamlna rate prevailed until, I believe, 1978 when there was a one time devaluation Law. At that time, it provided that sixty percent of ~he contractor profits, fro~ 420 to, I think it was, 620. I was vety much involved in that one. It oil company profits, should go to the gover~ent and anything over that which was just shortly after I retired from the Bank. (I retired at the end of " 16 January. 1977.) I still remember that for a period of months, all through the ministers. Some were their ideas, which they suggested to, and discussed with Spring of 1968, everybody was writing memoranda to the economic ministers of us. I should emphasize that everything we did was in agreement with them. Ye the government on the subject of devaluation. Some of that advice was didn't undertake any independent actions and neither did they. We worked as a solicited, some was volunteered. They were not all in agreement either on the team, in complete cooperation. They didn't always accept fully every question of whether there should be a devaluation at all, or how much of a recommendation we made. They made their own decisions on ev~rything ·· as we devaluation. thought appropriate. For the most part, those decisions were decisions that I was one of those who wrote such a memo. Discussions went on for we in the course of discussions had agreed were the proper ones. Sometimes months during that spring. 1 came back to Washington at some point during the they were not. For either political or other reasons, they sometimes felt summer, then went out there again, I think it was early in the fall of '78. they couldn't go ahead along certain lines. They may even have thought that The first person I went to see was Minister Ali Wardhzna, Minister of Finance, our economic reasoning was bad at certain points, although I can't really the first afternoon I was there. He greeted me by saying, KYell, we've made recall any of those. If they did think so, they were too polite to mention the decision. It's what you (and some others) recommend; only five people in ••• the country know about it, but you have to write a memorandum telling us why One of the first things we did was to recommend to McNamara and the we did it." I said, "What do you mean? You know why you did it. You've been Board of the Bank that what was called the "Technical Assistance Credit" be talking about it for tha last five months." "Yea, we've baen talking about it aatabliahed, Tha purpose of the Technical Assistance Credit was to finance 50 much that we are confused. We're going to have to make a statement to the the employment of experts. It was to finance the employment of individuals or cabinet, to the parliament, and to the public; and you have to write it." So firms to make studies of particular problems -- studies and recommendations I did write it and they used that statement. for action, That proved to be enormously useful. The arrangements were very OLIVER; What sort of projects did you induce? Did you use any program simple in that all that was needed to allocate some part of that credit was lending? agreement between myself and the Minister of Planning. Perhaps you should tie this to the rescheduling of the debt? OLIVER: And McNsaara7 BELL: Yell, starting at the beginning (by the beginning 1 mean the assembly BELL: No, he delegated that. Just my agreement and and the agreement of th~ of the resident mission staff in Jakarta which took place for the most part in Minister of Planning was enough. Of course I reported to him about what we September of 1968), we began work on quite a number of fronts. Some were our agreed, but his approval wasn't required. Of course the approval for the own ideas, which we suggested to, and discussed With, the governnent Board of the creation of the credit was required, but the particular uses of l7 18 the credit were decided entirely in Jakarta. Ve started a long series of OLIVER: Why was it necessary to have subsidized fertilizer? studies, At that time it was much less expensive than it is today to BELL: In order to make the use of adequate quantities of fertilizer undertake a lot of studies. ~e gpt quite a lot done. There was a considerable attractive and feasible for the growers. focus on our part initially on agriculture, involving the rehabilitation of OLIVER; Was the subsidy removed later? irrigation facilities which had been very poorly -.lntained. They had in many S£LL: No, the subsidy has existed until this last year. I "think it is cases gone to ruin in the preceeding twenty years. finally to be removed in the budget for the coming fiscal year. It was set in OLIVER: Including tea as I remember. conjunction with a guaranteed purchase price for rice. The use of the 8ELL; Some of our first looka at the rice production problem were modeled on fertilizer and other improved inputs was made attractive to farmers. That's the program we had recommended in India. It involved first of all the really what accounts for the tremendous increase in production. As you know physical rehabilitation of irrigation facilities. A much larger reliable rice is the staple food in Indonesia. supply of irrigation water was provided. Second, there was a program of OLIVER: Is there tariff protection? I am curious as to whether or not India development and distribution of improved rice varieties, which the government protects ita rice against Indonesians and Indonesia protects its rice against executed very well. Then there was a program for the distribution, at Indiana. subsidized prices, of fertilizer necessary for expanded production, and the S£LL: I frankly am not sure about the answer to that, but I am sure that in guarantaed purchase by a government agency of rice at a minimum price ao that neither esse is import restriction significant. India, too, has succeeded in that price was always available to the producer no matter what the private increasing rice and wheat and other staple commodity production very traders were offering. significantly, although the Indonesian esse is outstanding in the world. A The combination of the improved irrigation water supplies, of greatly couple of years ago, as I recall, FAO gave some special award or honor to improved availability of higher yielding rice varieties, fertilizers and President Suharto in recognition of what they achieved in the rice production insecticides, and guaranteed attractive prices resulted in immediate increases program. in rice production. Seven or eight years ago, despite the increases in rice OLIVER: What other projects come to mind? production, Indonesia was still importing rice. It was the world's largest B£LL: Well, we concentrated quite a bit on the improvement and expansion of importer of rice. Today and for the last several years, Indonesia has had a electric power generation, trans~ission, and distribution facilities as well surplus of rice and has actually exported some. What it amounts to is that as transport and education facilities. The electric power facilities were in they have more than doubled rice production in about 10 years. a terrible state ln 1968. The Dutch during the colonial period had never l9 20 Invested very much In the development of electric power facilities. As 1 our feasibility study we had predicted that it would take 18 months for the recall, In 1968 the total generating capacity In the country was about 600 plant to reach full capacity production. That prediction was based on the megawatts, which was a ridiculously Inadequate figure. Together with the experience of the two plants which had been built in the year just prior to government of Indonesia, we sponsored a whole aeries of studies looking toward that in the United States. In the Indonesia case, it took exactly two weeks the expansion of the electric power ayate•. ~a went through a very difficult for the plant to reach full capacity production. After about• two or three period when the economy was expanding aharply and urban growth and power .onths of production, however, they had to shut it down, because, contrary to demand growth was very rapid. I think it was in 1972 that there was such a the recommendations we had made in the feasibility study, they had made no shortage, because new facilities had not yet come Into operation, that there provision for the transport of the product to Java where it was most used and were continuous blackouts in Jakarta and elaewbare for an extended period of moat needed. But they then quickly made such arrangements and the plant time. Subsequent to that time, the facilities for generation, transmission, res ...ed production. It worked like a charm ever after. and distribution were very much expanded and are now very satisfactory. One of the first things the resident mission studied in 1968, early OLIVER; Were there any industrialization projects under IFC or under the 1969, was the expansion of that plant. One of the early loans of the Bank was Bank? to finance a second stage of the Pusrl Fertilizer Plant. When it first came BELL; Yes. Probably the outstanding project, at least outstanding in my into operation in the late 60s, it produced an additional 100,000 tons a year memory (which doesn't necessarily prove anything,) was the expansion of the That plus the 100,000 tons from the original plant was Indonesia's total original Puari Urea Fertilizer Plant. That plant had been the subject of a production of urea. It's total production of urea today is something over a feasibility study in 1957 or 1958, a feasibility study which, by che way, was mUUon tons. done by the consulting firm of Gasa, Bell and Associates and finally resulted OLIVER; Were there any essentially program loans? in a contract in 1961, 1962 or thereabouts with an American firm which built BELL: No, there were not. All of the loans without exception in that period this plant. It vas a plant designed to produce 100 thousand tons of urea per were project loans to finance specific projects. That, as I told you, did not year. At the ti.a that we made the study in the late fifties, there were only by any means preclude extended and continuous discussion with the government 2 such plants in the world, both in the United States, and they were the basis of their overall economic policies and program. There was extended discussion of the project design in Indonesia. of those and agreement on the•. Action was taken by the government pursuant In the early '60s, the contract was finally signed and the plant to that agreement, helped by the economic assistance that the Bank was built. It was from the beginning quite a success. I recall very well that in providing in the form of IDA credits, which, in 1974, were substituted for by g l 0 ii ~ ~ • -- • • ;) • - • 0 0 • - • n g • • • n - • - ' • - ~ - • • " : ! t •' " • • n ~ ~ ~ '• - - - ~ n ' :- • , • 0 • • • • ' • ~ • - • • 0 - 0 • 0 0 • •0 ~ 0 • • • • • -~ 0 ~ ~ • • g - ~ " ~ ~ 0 ~ • • - ! 0 • ' -~' ! - ~• i - ; • ~ 0 0 ~ - - ; • • ~ • ' ~ ~ 0 ' g ~ ; • • • ~ 0 • ~ 0 • ' • - ~ • • n '•• ' • ' • 0 ! - • • • • 0 • " ' • 0 ~ ! • ! 0 • • ; - ~ 0 " " 0 0 • • t • • f : ' ' n I • " - ~ . i .. 0 " • • • ~ • • ! t • • ' " $ - ~ ' - ' ~ - - • - n ! n ! I ~ - ' • • ' n 0 0 l 0 • • 0 - • ' ! n 0 ~ 0 !. t - • • • - - n " " $ ! • • 0 0 • - • n • • • • n 0 • l- - " • [ • I 0 :; • , ~ ~ ~ ~ - • :; • i i - , 0 0 • " • • • n • '" " • • '• 0 --- [ g • ~ 0 - ~ n • ~ ~ ' I 0 0 " " • • • • : ~ • " " : • " • • 0 • , • I - n • ! - ~ ' E • ! ~ - •0 0 § - o;. 0 ' 0 • $ 0 • l • 0 0 l • i ! • 0 0 ' ' ~ • " ~ I ' i 0 " :; • " f n g ' i ~ • • • • " " j 0 i - • fi • , - • • 0 " : -- n' g • - ' ' ' g • • • n " i 0 0 t : • 0 • • • l - " ~ i • ~ l • I • : g - ~ - • • g 0 ~ l • • • 0 l • - • • 0 ~ ~ : ~ • • . " 1 l. i ' ~ • 0 " - ' • • • •: i~ 0 0 - n ! g i" " ~ ~ - • - n " , - - - • ~ t ' J!" 0 : - • g ' ~ • ~ • • • ~ ~ ! :g n 0 • : 0 " ~ 0 0 0 g ~ I ~ - • • " • - ~ ~ l - ! 0 ~ " " ~ ~ - • ~ • • ' • • ' 0 l - 0 • - " i •• • • • " ~ " 0 • , • • • ! 1 ~ • • ; 0 • • n 0 " ' ~ n n - • • - • • 0 l l • - • ! ' • • " • '· • : - • ~ • " • i • • ~ ~ " 0 l • ; • • - ' " • " - '• " n • 0 0 • • ~ - • ~ : - ' " ~ 0 ' • ' i - l '~ n ' ' n • " • • ~ - ~ - • f 0 ~ 0 , • ~ • " - " " 0 0 • 0 • ' ~ t 0 I ~ • 0 0 • n n • ~ : • - • • 0 ~ • i• • ~ 0 n i -- " g • " • 'f ~0 • - •• t " " ; " • • " ~ ~ ~ • i. • - i • • • - • • • n ~ • - • g - ~ ~ :; 0 ~ 0 • • f 0 I ' ~ ! 0 • i - - • • ! ' ! 0 ~ I • n ' " • " • " ~ 0 s ; • • 0 • n 0 r l ' - • ~0 - • - • - ' n ~ - ' • , n• ' • • ~ ' ~ n n n ~ • " ' • • ' ?" 0 • • • - • • '" ' " • n - • • 0 • 0 2l 24 a new proposal by the creditors which was far more generous and which the representatives on the Board of Directors of the Bank, at the time of the last Indonesians then said they could accept. And that was agreed. non project loan to Indonesia, objected to the fact that there were no OLIVER; I'm anxious to get you into Africa, but before I do that, let me be conditions attached. The Bank staff explained that there were no conditions sure that I have covered all the major baaea. ~at sort of things would you because the Indonesians had already taken the actions which were desirable like to tell me about your lndonealan experience? I'm told it was a little difficult for some people, including the US BELL: I think what I would add (if my me~ry were better, I probably would government, to understand. add a lot more) is that certainly throughout that initial four year period the OLIVER: Including devaluations from time to time? cooperation between the Bank and the government of Indonesia, between the Bank BELL: Yes, devaluations, and the series of actions over the last two years In staff represented by the mission in Jakarta and the government represented by which piece by piece the Indonesians have reduced the restrictions on imports. the economic ministers, was ln .y view absolutely perfect. There were no eliminated import and trade monopolies, reduced regulations, simplified questions of any significance which were not discussed by the tWo, thoroughly regulations, all of which had results which are apparent as you look at the and exhaustively discussed, and in most cases agreement waa reached on what growth of non oil exports in the last year or two, non-oil exports which, I the proper course of action was. In no cases, did the Bank, as represented by believe in 1987 for the first time ever, exceeded exports of oil and gas and the resident staff, say that these agree-ants were conditions to further wbich were far above any aarUer year.. I believe this reflected in good part credits. In all cases the governments of Indonesia made the decisions and many of the changes in the trade regime and the regulation of production and then took the actions. transport and of foreign and domestic investment. There were no cases in which conditions relating to the over·all OLIVER; Would you care to comment on the wonderful story you told about economic program were i~osed. That is one of the striking differences McNamara and the reorganization of 1972 and then about the period when you had between the way that whole program in Indonesia developed and the way in which the opportunity to co~are East Africa with East Asia? many of the structural adjustment loans of today are made. In many of the BELL: Well, let me do that briefly if I may. structural adjustment loans, there are conditions. In many cases it is OLIVER; Surely. reported that those are conditions which are not really very much to the BELL: In 1972, the decision was made to have some change in the organization liking of the borrowing government and which are imposed by the World Bank or of the Bank and to establiah five or slx regional offices. In that connection the Fund or both. That was never the esse with Indonesia. In that at the time in Jakarta as director of the resident mission, I was asked one connection, I'm told (I can't vouch for this directly) that the US Friday evening by telephone to be in Yashington for a meeting at 9:00 on 25 26 Monday morning. I asked what it was about and was told I would be informed do with it, but I don't really think so. I did ask subsequently whether he about it when I arrived. At 9:00 Monday morning (I had arrived the night planned to continue to have the resident mission in Indonesia play the same before), 1 went to McNamara's office. He told me of the reorganization plans role that it had played in the past. He said, "Yes, with one difference, that and said that he wanted me to be the vice president in charge of the east it would report again to just one person; not to big, but instead to the vice African region. I said, I would prefer not to do that, that I wanted very president in charge of the Asia region." That was the way 'it did work. So ~uch to continue ro be the director of the resident staff in Indonesia, This that the resident staff really did continue to function just about as it had, was entirely truthful; I said that I knew nothing whstever about Africa and and it continued that way for many years. wasn't really very much interested. Therefore, I was saying, "No." OLIVER: So in any event you went to East Africa. Hr. McNa.ara said that he thought I shouldn't be precipitate about BELL: Yea, I did. 1 started to try to learn something about East Africa, this; 1 ought to think about it and come back to his office at 11;00 with an which I knew nothing about and which I found was quite different from answer. I went back at 11:00 and said that I had thought it over and the Indonesia. For that aattar moat of East Asia and the Pacific were different answer was no. ~ereupon, somewhat to .y surprise, he aaid, ~You don't really from Eaat Africa for •any reasons some of which I'll mention. The governments have a choice. You can either accept the position, or leave the Bank." I of the countries of East Africa were not undertaking wall planned, well said, without a lot of thought, I would leave the Bank. Whereupon he said, conceived, and vigorously executed progrags of development. There were in "Well, will you take the position sa a personal favor to .e?" To which I .oat of the Eaet African countries even fewer people with any experience, could only say, "If you put it on that basis, I can't say no." education, or training of the kind required for development. There were other OLIVER: Have you any idea what was behind this? Was it just that the ti-. reasons. If I knew more about East Africa, I'd probably understand some of had come to go back onto a country basis and gat out from under tha direct them. line to HcNagara, or was it something mora than that? OLIVER: Well East Asia is a relatively lush place basically, and East Africa BELL: I've never actually asked Hr. HcNamara directly why he wanted this. He is a relatively barren place I would have said. said that he felt that the Bank had rather neglected East Africa and that a BELL: Yes, and no. Soma of the countries of East Africa are rich in mineral ~ch more vigorous prograg in relati~n to East Africa had to be undertaken. resources. He thought that 1 could do it. There may have been other reasons. It may OLIVER: Not ln agriculture. You couldn't have doubled, I would have said, have been that the complaints about the way the resident missions operated, production in ten years in East Africa. complaints from departments in the Bank, were cumulative and had so.ethfng to BELL: No, 1 don't think that would have been pos91ble, but 1 think 27 28 significant increases in ~any of the countries would have been possible, In meeting with President Hobutu together with his personal assistant, who ne~t Tanzania, for example, where, with the best of intentions and greatest degree to Mobutu was the most powerful man in the government. Mobutu was a very of interest on the part of the leaders of the government in development and striking personality. He started the meeting, after the e~change of economic progress, they were unaucceaaful. They had, I discovered in my one greetings, by saying, wNo doubt you've heard lots of things about me from your brief visit there, failed quite completely in attempting to increase American and Belgian friends, including that 1 am an alcoho1ic, a dope fiend, agricultural production by establishing collectives and cooperatives. a terrible womanizer, one of the richest men in the world, and one of the I recall very vividly a trip in which, together with the Tanzanian worst crooks in the world. Don't believe a word of it; none of it's true. Ambassador to the United States, I visited several cooperative farms and we like to drink once in a while, I like a woman once in awhile. I've never found that there was a lot of modern equipment and machinery just sitting taken dope in my life and my personal fortune is quite modest. around unused, At mid-day there were a lot of quite healthy men asleep in He then said, and this is interesting, •You know you spent quite a front of a storehouse which was pretty empty. The kinds of incentives that lot of time at this meeting you've been conducting discussing this very large. had been established were si-PlY ineffective. Tanzania was one of the places short-tar• debt which we have recently accumulated in Europe and debating the where the country was atte-Pting to do something, but I think it was question of what could be done about it. You have also been discussing how misconceived. stupid we ware to incur that debt. Let me tell you why and how we incurred In the brief period that l was involved with East Africa, one of the that debt. We had aoaa urgent needs which we couldn't meet, end just at that places I found most interesting was Zaire. I went there once when I decided point the Arabs came to .. and said, If you will break relations with Israel, that the consultative group on Zaire ought really to .aet in Zaire rather than we will lend you (I've forgotten the figure, $10 billion dollars, or something in Paris. That was after I discovered thst the last time it had met in Paris, on that order) •payable at the end of 20 years with zero interest. That's all representatives of the Zairian government hadn't even appeared. I thought if we had to do to get it. So I went on nation·wide TV and radio and said, The they were to be interested and to be involved in an effort, the beat thing to Israeli's are our very good friends. They have helped us enormously, but the do was to have a meeting in Kenshasa. McNamara and others agreed that was a Arabs are our brothers. So we are breaking diplomatic relations with Israel. good idea. There were some objectioris from some people but they didn't He said, •As soon as l had done that, I got in toueh with our Arab friends. prevail. and they began to talk about a loan of $500,000 payable in 5 years. In the ~. had that meeting, and it was attended by the high officials, ~antime, we had, in the expectation of this big loan on very favorable terms. economic officials, of Zaire. Immediately subsequent to the meeting, I had a put it all in short-term debt to banks in Europe.• 1 was brash enough to say 29 30 to him, "That is easily remedied. Reestablish relations with Israel." He felt that I was really much better equipped to work on problems in East Asia. said, "You know, we may do that." He didn't until some years later. He has I was particularly happy to be again involved with Indonesia and its problems. now, but that was perhaps a small illustration of the kind of person he was. Also with other countries that 1 have come to know something about in the OLIVER: I don't quite see how $500,000 dollars payable within five years region and which seem to me to be very pro•iaing, including Singapore, would have excaberated the debt all that much. Malaysia, Taiwan, Korea. As you know, of course, three of those last four are BELL: It didn't, but in the meanti•a they had borrowed a lot more from among what are described today as the Four Tigers or something like that. European banks. OLIVER: Newly industralizing countries. OLIVER: Overborrowed perhaps. BELL: Who have been tremendously successful in increasing their output and BELL: Oh yea, much overborrowed. He said, "In the expectation that the big incomes and their exports. loan we were going to get on very favorable terms froa so.a of the Arab OLIVER: Increasing their exports of industrial equipment as distinct from countries would bail us out and repay the short term debt". I thought at the Indonesia. time that he was genuinely surprised that, after he taken the aetion they BELL: Yea, although within the last year or two, industrial exports have urged, they hadn't eome through on what he said they had promised. begun to figure significantly in Indonesia's exports: textiles, garments, OLIVER: I understand. I take it you feel that Zaire has perhaps more plywood. They are beginning, I believe, to export machinery and metal potential than other areas of the region? products. Laat night, in hia talk to the lndonaaia·Amerlca society, the BELL: I think in •any ways it does. It baa vary substantial mineral Director of Pertaalna said that Indonesia had just concluded contracts for the reaourees. It has, or may have, soma petroleum resources; and it has sale of aoae airplanes which were manufactured in Indonesia to a number of extensive areas well suited to agricultural production which are, were then countries. They have already exported so~. He said also that within the and probably still are, producing far lass than they might. next year there would appear in the US market an Indonesian automobile, and OLIVER: Well, I guess your next incarnation vas back to East Asla. urged us ell to buy one. That 1 had not been aware of. BELL: Yes, as of July 1, 1974. OLIVER: It should be called the ~Indo," rather than the "Yugo.~ OLIVER: Would it be too much to say You were glad to get back? BELL: 1 hope if it happens it will get better ratings than the Yugo. I was reading a Consumera Union report on auto~obiles just the other evening which BELL: No, it would be accurate to say that, because, although 1 had begun to referred to the Yugo as a loose collection of badly connected nuts and bolts. learn something about East Africa and begun to be quite interested, I still I haven't seen that reference to the Korean car, but I want to find out more 3l about this Indonesian car. OLIVER: Well, Hr. Bell we're running out of tape, We can certainly do another one, but 1 wonder if you wish to suqmarl~e things, particularly from your Indonesian experience -- put a cap on things, so to speak. BELL: In line with what you were suggesting. 1 look at Indonesia as a good exa~ple of what can be done by way of develop~ent of the so called underdeveloped countries of the world, what can be done to improve the conditions of life of the poor which constitute most of the population of Indonesia and many other countries in the so called Third World. I look at Indonesia also as a very good example of the way in which such institutions as the World Bank can provide constructive assistance. OLIVER: Thank you.