Govt doubts WB report on graft

Govt doubts WB report on graft

JAKARTA (JP): The government questioned yesterday the accuracy
of a World Bank internal memorandum that disclosed Indonesian
officials were believed to have siphoned off more than 20 percent
of the bank's loan funds.

"To me, the 20 percent figure is a big question mark. How
could they have reached at that figure," asserted Budhy Tjahjati,
a deputy for foreign economic cooperation at the National
Development Planning Board (Bappenas).

Tjahjati was commenting on a front-page story in the Asian
Wall Street Journal yesterday which quoted the bank's memorandum
that attributed much of the corruption to the ruling Golkar
party, particularly in the two years leading up to the general
election in May, 1997.

The report, prepared for senior bank officials, largely
ascribes the problem to a colonial bureaucratic system that
presumes civil servants will supplement their low wages by
moonlighting, receiving kickbacks or siphoning off state funds,
according to the Journal.

Tjahjati suspected that World Bank officials might have
misunderstood the matter, wrongly concluding that funds had been
embezzled which in fact might well have been used for either data
gathering, land acquisition or the advance payment of rupiah
(local) costs due to delays in state budget disbursement.

"I think Dennis de Tray (the World Bank's country manager for
Indonesia) should be more specific as to which projects had been
affected by corruption and to what extent, so that we can take
the appropriate steps.

"If the World Bank lets the issue linger based on such a
general, open-ended report, our image in the international
community will be damaged," Tjahjati added.

She said that if the report was not true " we could sue the
writer".

Tjahjati admitted some "leakage" in the World Bank loan funds
but their amount could not have been as large as the internal
memorandum stated.

Latest reports put World Bank loan disbursements in Indonesia
as of July, 1997, at around US$11 billion.

De Tray was not available for comment yesterday as he is
overseas but Ben Fisher, a senior economist at the World Bank
office here, acknowledged that the report did not refer to any
specific projects.

"The internal memorandum was intended to be a general
framework for discussions with the Indonesian government in an
ongoing effort to improve project implementation," Fisher said.

He said he could not know exactly how the report could have
reached that figure because it was difficult to find specific
evidence.

"True, we closely monitor and supervise project implementation
and whenever we find any misappropriation we act firmly and
immediately to stop fund disbursement," Fisher said.

He confirmed there were cases where the World Bank had acted
to stop or annul disbursement until the problem was settled but
he acknowledged it was extremely difficult to put a specific
figure on the amounts embezzled.

The Journal quoted the report as saying that much of the
corruption involved state contracts with firms owned or
controlled by government officials and their relatives.

The memorandum, according to the newspaper, cited "numerous
reports of diversion of 50 percent to 80 percent of funds
budgeted for project land acquisition and resettlement
assistance," areas in which the World Bank has participated
heavily.

It found the worst siphoning of funds -- defined as 25 percent
or more -- in the ministries of home affairs, transmigration, and
forestry, the Journal said.

The analysis, based on reports prepared by World Bank staff in
Jakarta, appears to reflect the bank's awakening to global
allegations of Indonesia's endemic corruption.

On July 29, 1997, World Bank Vice President for East Asia and
the Pacific Jean-Michel Severino flatly denied a statement made
by Jeffrey A. Winters, an American associate professor at
Northwestern University, Illinois, in Jakarta that about 30
percent of the money lent to Indonesia by the World Bank
routinely disappeared somewhere inside the Indonesian
bureaucracy.

"We have checked his claim which he has made in the past and
found nothing to support such an estimate," Severino asserted in
a statement in Washington.

Severino said at the time: "Indonesia retains one of the best
records of successful project implementation of any of our client
countries."

The World Bank's new, tougher stance on the issue of
corruption seemed to have been instigated by its own president,
James D. Wolfensohn, who together with International Monetary
Fund Managing Director Michel Camdessus expressed determination
to escalate the war against corruption at their annual meeting in
Hong Kong last September.

"We have been pushing this line on corruption since last year
and we will again reaffirm to our board of governors that it is
an area we will not withdraw from," Wolfenshon stated in Hong
Kong. (rei/vin)