Expert warns of abuse of CGI loans for poverty program

Expert warns of abuse of CGI loans for poverty program

Berni K. Moestafa, The Jakarta Post, Jakarta

A prominent expert on poverty warned the government of renewed
corruption thriving within its poverty reduction program and
eating into loans of the Consultative Group on Indonesia (CGI).

H.S. Dillon said that battling poverty through government
development projects tended to breed corruption.

"What I see here is efforts by certain people wanting to have
a piece of the cake that is the CGI loans," Dillon told The
Jakarta Post on the weekend.

The CGI, which groups together Indonesia's major bilateral and
multilateral creditors, pledged last week, during its 11th
meeting in Jakarta, loans of US$3.14 billion to help finance the
2002 state budget.

The group, whose meeting had the theme, "Working together to
reduce poverty", has tied $1.3 billion of its total loans to the
policy performance of the government.

Among the items to fall under CGI scrutiny will be the poverty
reduction and anticorruption programs.

Failure to obtain the badly needed CGI loans in full would
have serious consequences for the state budget.

"I suspect the funds to finance projects for the poor may get
corrupted," Dillon went on.

He said the vulnerability of the CGI loans was apparent, given
the emphasis placed on the office of the Coordinating Minister
for People's Welfare on administering the projects.

He also suspected the ministry of adopting a centralistic
approach to tackling poverty, which was conducive to corruption.

Coordinating Minister for People's Welfare Yusuf Kalla,
however, told CGI donors that he would include local communities
and the poor themselves in the implementation of poverty
reduction programs.

CGI members made it clear that the loans should be distributed
in such a way that corruption would not reduce away their
effectiveness.

Indonesia, a country with around half of its more than 210
million population have descended into poverty, has had a
history of massive abuse of loans provided by the World Bank to
mitigate the impact of the 1997 economic crisis on the poor.

Late last year, for instance, the Bank canceled the second
$300 million tranche of its $600 million social safety net
adjustment loan mainly due to corruption by bureaucrats.

Subsequently, the World Bank slashed its loan commitment,
hoping the country would work harder to stamp out corruption.

It said Indonesia should focus less on the amount of lending
it received and more on how well the loans were being used.

Last week's CGI meeting discussed corruption issues for the
first time.

During the meeting, the government presented participants
an outline of its poverty reduction program.

The program's key feature is a coordinating committee chaired
by Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti, and Yusuf Kalla.

While Dorodjatun would tackle the macroeconomic issues
affecting the country's poor, Yusuf would address mircoeconomic
issues such as health, education and housing.

"Both of us will work to ensure that economic and social
policies are designed to improved the welfare of the poor,"
Dorodjatun said.

Another feature of the program's participatory nature is that
it allows the poor to help shape the policies to be implemented
in their respective regions.

"Stakeholders will be active participants in the process of
understanding the nature of poverty, choosing poverty reduction
objectives ..., monitoring outcomes and evaluating their impact,"
Dorodjatun said.