Fri, 24 Jan 2003

Bappenas official warns of embezzlement of CGI loans

The Jakarta Post, Jakarta

A day after the Consultative Group on Indonesia (CGI) pledged higher than requested fresh loans for the country, the National Development Planning Board (Bappenas) gave a stern warning that the loans could well end up being embezzled by corrupt officials.

Bappenas executive secretary Koensatwanto Inpasihardjo said that for many years, the loans from the country's traditional donors had been pilfered, thus reducing their beneficial impact.

Speaking during a discussion on the CGI loans, he said that at least 20 percent of the CGI loans for various infrastructure projects each year had "leaked" during the implementation stage of the projects. This occurred through corruption, especially the marking up of project costs.

Koensatwanto said that Bappenas was currently investigating the massive corruption, but quickly added that the board could only play a monitoring role and had no power to impose sanctions.

He said that Bappenas would ask the President to issue a special decree to tightly monitor the CGI-funded projects.

The CGI, which groups 30 bilateral and multilateral donors, pledged on Wednesday at the end of its two-day meeting in the resort island of Bali some US$2.7 billion in fresh loans to help finance the 2003 state budget deficit.

The new loan commitment was announced amid rising calls for the government to stop taking out foreign loans as these would only create too much of a burden for the next generation due to the already high level of foreign debt. There have also been concerns that the new foreign loans would only be embezzled by corrupt officials as happened in the past.

Unconfirmed reports previously said that around 30 percent of World Bank loans fell victim to corruption during the 30-year rule of former President Soeharto. This figure amounts to some $10 billion.

The World Bank has admitted that the abuse took place, but thus far has not stated a figure.

State Minister for National Development Planning Kwik Kian Gie, who is also the chairman of Bappenas, has told the CGI forum in Bali that the country would not have to beg for new loans from the donors if it could curb the rampant corruption that cost the cash-strapped country some $28.4 billion a year.

He said that among the losses to the state from graft, Indonesia was losing around $9 billion from stolen or smuggled logs, fish and sand, and $8 billion from tax leakages.

Elsewhere, Koensatwanto said that there were suspicions that foreign donors might be playing a part in the embezzlement of the CGI loans.

He pointed out that the donors had been aware that their loans were embezzled by the previous corrupt regime, but they continued to disburse the money.

University of Gajah Mada (UGM) economist Revrisond Baswir shared Koensatwanto's view, saying that the embezzlement of the CGI loans was part of a conspiracy between the government and foreign donors.

He said that the government had deliberately set the state budget each year in a deficit position to provide a reason to continue borrowing from the CGI.