WB denies tampering with RI poverty figures

WB denies tampering with RI poverty figures

NEW YORK (Dow Jones): World Bank officials Tuesday hit back at charges they manipulated figures on the number of poor in Indonesia to avoid embarrassing the Soeharto regime before its fall last May.

The charges, previously reported in the Wall Street Journal, have been voiced among others by Jeffrey Winters, a former consultant to the U.S. Agency for International Development now at Northwestern University.

But after keeping relatively quiet on the issue, Bank officials now lambast the charge as a "ludicrous assertion."

"There was no deliberate manipulation to please a government," said Peter Stephens, spokesman for the Bank's East Asia and Pacific regional office.

"The methodology used in Indonesia is entirely consistent, and something that we stand by across the board. We're not in the business of fiddling numbers. We're in the business of reducing poverty," he told Dow Jones Newswires.

At the heart of the debate are charges by Winters that during the preparation of its 1990 "Focus on Poverty," the Bank buckled under pressure from the Indonesian government to alter its estimate of the number of people living in poverty.

Then President Soeharto, the self-proclaimed "Father of Development," had personally declared a record low of 30 million people living in poverty - proportionately less, at the time, than in the U.S. Critics charge that the Bank agreed to use Soeharto's figure for fear of embarrassing his regime.

World bank figures are generally considered to be independent and are used by a wide range of third parties, including ratings agencies such as Moody's and Standard & Poor's. But the issue is at the center of wider allegations that the Bank routinely gave a false impression of events in Indonesia in order to defend its status as the jewel in the World Bank's development crown.

On Tuesday, Northwestern's Winters stood by his assertions, saying that while he worked in Indonesia, the fudging of numbers by the World Bank was something that people just "rolled their eyes at."

Winters has long maintained that the World Bank turned a blind eye to diversions by Indonesian officials of around 30 percent of loans, charges which the Bank's vice president for Asia and the Pacific, Jean Michel Severino, dismissed in July 1997 as "demonstrably untrue."

One month after Severino's remarks, a report commissioned by the Bank's resident staff in Jakarta concluded that "at least 20 percent to 30 percent of GOI (Government of Indonesia) development budget funds are diverted through informal payments to GOI staff and politicians." The report was leaked to the Wall Street Journal a year later, in August 1998.

The Journal first reported in July 1998 allegations that the World Bank had altered its poverty figures.

Winters said that he expected the controversy over the Bank's poverty figures to follow the same pattern as the dispute over the diversion of bank funds.

"I've been through this before, where I or others say something, the Bank issues fervent denials, and then it takes time for the documents to be leaked from inside or other things to happen before we have the documentation we need," Winters said.

In this case, however, Bank officials were standing firmly behind their work.

Kyle Peters, who authored the disputed 1990 report, confirmed Tuesday that routine discussions were held with the Indonesian government prior to the publication of the report, and that the methods used to calculate the poverty levels were discussed.

But he emphasized that the World Bank poverty figure was not changed as a result of those discussions. The only change between the draft and final reports, he said, was that the Bank's estimates were placed sequentially after the government's, and not before.

"There was a change in the presentation, but there was not - and this is very important - any change in any of the calculations or any of the numbers," Peters said.

However, though the World Bank presented its own figure of 38 million in its internal report on Indonesia that year, it used only the official government figure in its public World Development Report to show a staggering 34 percent drop in the number of people in poverty over the previous three years.

Once considered the World Bank's biggest success story, poverty in Indonesia was reported to have fallen 46 percent between 1980 and 1987 under Bank figures - a larger fall even than was claimed by the Soeharto government.

Since Indonesia's economic crash earlier this year, up to half of the nation's 200 million population has been plunged back into poverty. While the crisis has caused genuine suffering, the huge increase in the number of reported poor reflects in part a return to statistical reality, Winters said.

"Just before the crash, the World Bank said Indonesia had roughly 11 percent of its people living in poverty. That was less than in the U.S.," he said. "Something was very wrong."

Bank officials concede that they may have been swept up in the enthusiasm over Indonesia. But they strenuously deny they ever went as far as to doctor development figures.

Soedradjad Djiwandono, the former governor of Indonesia's central bank, seemed to agree with that assessment.

He said the World Bank did often go along with government pressure to soften negative statements about the country in reports. But he said he was never aware that any figures had been altered as a result.

"This toning-down was always on how you put things in words, not in figures," he said.