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.