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.