Disbursement of $1.1b WB loans delayed

Disbursement of $1.1b WB loans delayed

WASHINGTON (Dow Jones): Bowing to U.S. concerns, Indonesia
agreed not to spend $1.1 billion in new World Bank loans for
social safety net programs until after national elections are
held next month.

The commitment was made on Tuesday after the U.S. on Monday
placed a 48-hour delay on the World Bank's approval of the new
loans, citing fears that the money would be perceived as a boon
to the ruling party in advance of the June elections.

But the World Bank said on Tuesday it had approved loans
totaling $400 million for two Indonesian projects.

The World Bank said in a statement it will provide $300
million to fund a revamp of water resources management in
Indonesia and an additional $100 million for relieving poverty in
urban areas.

Government opponents in Indonesia and development activists in
Washington have campaigned against the loans because they contend
the money will be stolen by the ruling party for patronage or
vote buying.

The bank had already required Indonesia to agree to tough
safeguards against misuse of the funds, but U.S. officials sought
the additional guarantee out of concern that the bank would be
seen as taking sides in Indonesia's first election since the
downfall of President Soeharto last year.

"We think these loans deserve the support of the bank, and
we're comfortable with protections in place to ensure that
resources go to their intended purposes," said one U.S. official.

The bank's board, originally slated to consider the loans on
Tuesday, is now expected to approve them on Thursday. While some
funds may be turned over immediately, Indonesia agreed to hold
them in an account until June 30.

"The government of Indonesia does not need immediate
disbursement of the funds from these loans," a senior Indonesian
government official said. The delay "should remove any doubt that
the funds will be directed to other than their designated
purpose," he said.

A World Bank spokesman said "technical" details need to be
finalized and that the additional $1.1 billion in loans should be
approved without further hitches at Thursday's board meeting.

Earlier this year, the World Bank delayed disbursing the $600
million loan because the Indonesians had dragged their feet in
instituting surveillance procedures to ensure the funds aren't
abused.

Government officials already had admitted that money from the
social safety net fund has been illicitly channeled into
political activities.

In Jakarta, hundreds of non-governmental organizations (NGOs)
including Urban Poor Consortium (UPC), International NGO Forum
for Indonesian Development (INFID) and the Indonesian Consumers'
Foundation issued a joint statement on Tuesday asking the WB to
postpone the disbursement of the two additional loans planned to
be discussed on May 20.

The WB should be transparent in extending the loans to
Indonesia and should also listen to the local people, the groups
said.