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