Graft surely occurs

Graft surely occurs

The controversy over the amount of World Bank loans to
Indonesia that has been embezzled by officials should not divert
attention from the core of the matter: corruption is pervasive in
this country, especially within the government, which for a long
time was perceived to be among the most corrupt in the world.

Though the "more than 20 percent" figure stipulated in the
World Bank's internal memorandum is debatable -- we suspect the
figure may be much higher -- it is completely beyond our
reasoning to suggest that the disbursement of the bank's loans to
the country has not been affected by the corrupt mentality within
the bureaucracy whose employees are among the lowest paid in the
world.

Some may allude to the tight auditing system and tough
supervisory mechanisms applied by the multilateral bank to its
projects that would make it practically impossible to
misappropriate the bank's money. Others may point to its well-
experienced and highly paid staff recruited from around the world
as a factor that could protect the bank's operations from corrupt
practices.

But the basic question, in so far as Indonesia is concerned,
is how could the World Bank operate in an island in the sea of
corruption? How could World Bank-funded projects be implemented
in isolation from the administrative culture which is not only
tolerant of collusion and diversion of funds but which also
blatantly expects civil servants to supplement their incomes by
such means?

Even though the bank's country office in Jakarta is among the
largest in the world -- which makes sense as Indonesia is also
among its three largest borrowers -- its officials cannot
administer the loans by themselves. The reason is not only
limited staff numbers but, and more importantly, because the
bank's loans are always integrated into the state budget.
Furthermore, it would be grossly inefficient for the bank to
employ so many expatriates to manage its loans. One should also
remember that as the World Bank's clients are all sovereign
borrowers, it would be quite an embarrassment to the government
if the bank involved itself too heavily in the loans'
administration.

It is nonetheless reasonable to assume that the bank-funded
projects, though not completely sterilized from the bureaucratic
environment of corruption, are less vulnerable to malfeasance,
compared to projects financed entirely by the government.

The World Bank has steadily improved the management of its
loans. Its overall supervision mechanism, from planning,
preparations, implementation, competitive bidding for its
procurements to post-implementation audits have been so elaborate
that Indonesian officials have in the past criticized them as too
arduous. But all this is not a full guarantee that corruption and
collusion have not hit the bank's projects, especially because
almost every one of its projects requires myriad transactions
involving private contractors and state agencies.

We even suspect that the bank's staff in the country sometimes
may have had to acquiesce to the political pressures under the
authoritarian rule of the Soeharto regime and thus lower its
standards in order to facilitate project implementation.

There is actually nothing completely new in the bank's report
in so far as the perception of corruption is concerned. The most
surprising element is the bluntness in which the bank calls a
spade a spade, quite a departure from the tactful and diplomatic
manners the bank has applied in the past when talking about
corruption.

The new attitude can be traced to the policy stance the World
Bank and the International Monetary Fund adopted in early 1997.
They no longer see corruption as the internal affair of its
sovereign clients but an economic problem -- hence entirely under
their purview -- that undermines development. Both institutions
declared war on corruption at their annual meeting in Hong Kong
last September and for the first time in their history issued
elaborate documents stipulating guidelines to their staff on how
to prevent corruption and how to help governments combat graft.

While the published figure on Indonesian bureaucratic
corruption is admittedly questionable, the World Bank should not
budge on the central theme of its report. It should instead act
more vigorously and transparently in combating corruption within
the implementation of its projects in this country. Hopefully,
its drive will serve as a catalyst to the development of strong,
efficient and transparent governance in the country.