WB loan delay hints at rising distrust of government

JAKARTA (JP): The World Bank's delaying of US$1.1 billion in loan disbursement for Indonesia indicates increasing international concern over aid abuse by government officials, analysts have said.

A senior economist at the LPEM economic and social research center of the University of Indonesia, Rasaka Mahi, said on Saturday that the World Bank was particularly concerned over widespread criticisms of mishandling of the multibillion dollar social safety net program.

"Many non-governmental organizations have called on the World Bank to delay the release of the loans amid fears of abuse by government officials," he told The Jakarta Post.

He explained that the international-sponsored social safety net aid, aimed at helping the poor survive the current economic storm, had not all reached the intended recipients and some funds had been misappropriated by officials.

"In addition, there's the political risk," he said, pointing out there was no guarantee that government officials would be impartial when providing the financial aid to the poor ahead of the country's landmark June 7 general election.

Government officials have in the past been stalwart supporters of the ruling Golkar Party.

The World Bank approved on Thursday two loans worth $1.1 billion for Indonesia, including $600 million to help strengthen the social safety net program and $500 million to support economic reforms.

The money was the second set of World Bank credits for Indonesia in less than a week, after $400 million in loans were approved for poverty alleviation and water resource management.

The country, however, won't have access to the loans until after the June general election.

The World Bank said in a statement that it gave approval on the loans after Jakarta agreed not to touch the funds until after the election.

Tony Prasetiantono, an economist at Gadjah Mada University, said the World Bank had to delay the disbursement because it wanted to show the Indonesian people that it was not supporting any political party -- namely Golkar -- in the elections.

"I think the WB wants to play it safe," he said.

Golkar, which easily won every general election during the 32- year rule of authoritarian former president Soeharto, is now facing serious challenges from opposition parties.

Tony added that the one-month delay to the Bank's loans would not have a serious effect on the government's budget in the 1999/2000 fiscal year.

"The government can secure other sources of funding," he said.

The press earlier reported that the World Bank made the delay following pressure from the U.S. government.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita denied this on Friday, saying the Bank delayed the funds because Indonesia could not meet certain loan conditions before the election.

Ginandjar seemed to play down the delay, saying the country does not need the loans at the moment anyway.

But the University of Indonesia's Rasaka urged the government to be serious in taking the necessary measures to prevent further abuse of the social safety net aid.

"I think the public has to have a bigger role in monitoring the program," he said.

He admitted that launching a social safety net program was no easy job, and that other countries had also experienced serious problems in similar programs.

The government plans to allocate Rp 6 trillion for the social safety net program in the current 1999/2000 fiscal year.

Chairman of the National Development Planning Board (Bappenas) Boediono recently admitted abuse of the social safety net funds for political ends.

The press has also reported that some Rp 8 trillion of the Rp 17.9 trillion social safety net aid for the 1998/1999 fiscal year failed to reach its intended targets.

The government and the World Bank are currently working to improve the social safety net program, including developing a better monitoring system and simpler and transparent procedures. (rei)