Donors urge RI to intensify antigraft drive

Donors urge RI to intensify antigraft drive

Dadan Wijaksana, The Jakarta Post, Jakarta

The two-day annual meeting of the Consultative Group on
Indonesia (CGI) kicked off on Wednesday, with donors stressing
the importance of intensified efforts to tackle corruption to
help improve the investment climate and increase the
effectiveness of foreign loans.

The Asian Development Bank (ADB) and the Japanese delegation,
two of largest donors in the country's traditional donor
grouping, acknowledged that corruption had become a major
obstacle hampering investment and consequently slowing economic
growth.

"We realize that corruption is one of the major problems that
Indonesia is currently facing, as it hinders private investment
badly needed here," a Japanese diplomat told The Jakarta Post on
the condition of anonymity.

"We had a discussion with the business community earlier at
the meeting, and they were mostly complaining about how high the
cost of doing business here is due largely to corruption."

He added that his delegation would urge stronger efforts on
the part of the government to eradicate corruption, and note it
in its official presentation to be read out before the CGI forum.

Corruption is not a new phenomenon in Indonesia. The practice
has been flourishing for decades at almost every level of
government, with no signs of abating.

It has caused business costs to soar and made the country less
competitive in terms of doing business. As a result, foreign and
domestic investment remains hard to come by, making it difficult
to generate higher economic growth crucial to help resolve the
huge unemployment problem here.

The World Bank said in a recent report, citing a survey among
1,000 domestic and foreign companies, that micro-economic
instability, policy and legal uncertainty us well as corruption
were what investors considered needed great changes to fix the
investment climate.

In fact, it was rampant corruption that has led some elements
in society to attack the CGI's role in the country, saying that
the CGI aid had added the burden of debt to the people. They also
deemed it inefficient, as much of the loans had been misused by
corrupt officials.

Among the critics of CGI are the Indonesian Forum for the
Environment (Walhi), a number of top economists including former
economic minister Rizal Ramli and Revrisond Baswir of Gadjah Mada
University.

The National Development Planning Board (Bappenas) has
estimated that at least 20 percent of the CGI loans intended to
finance various infrastructure projects each year, had been
abused during the implementation stage. State Minister for
National Development Planning Kwik Kian Gie also said that
Indonesia might still need the CGI this year, but not next year.

Shamshad Akhtar, ADB deputy director general for Southeast
Asia, admitted that there were cases of abuses of loans pledged
by the donors, saying that it eventually reduced the
effectiveness of the loans.

However, she said the donors and the government had been
setting up monitoring measures, especially at the project level,
to improve the effectiveness of the loans.

"All our new project have been very carefully designed and
have clauses of accountability.

"..There are appropriate audits, intensive process and
procedures for transparency in the procurement mechanism, there
is very intensive review at the project level, and so on," Akhtar
said.

Elsewhere, the World Bank, which chairs the forum, has said
that the pledges for next year's budget deficit would be in the
range of US$2.3 billion to $3billion.

However, the Japanese diplomat told the Post that his
government would provide $660 million to be included in CGI's
loan pledge, which would officially be determined on Thursday.

On top of that, he added, it would also set aside $220 million
in export credit, bringing the total lending from Japan to $880
million.

World's most corrupt countries 2003
(rated by Transparency International)

1. Bangladesh 6. Tajkistan
2. Nigeria 7. Georgia
3. Haiti 8. Cameron
4. Paraguay 9. Kenya
5. Myanmar 10. Indonesia

* The survey covers a total of 133 countries