WB loans graft needs to be curbed

WB loans graft needs to be curbed

By Kastorius Sinaga

JAKARTA (JP): An allegation by an American expert recently
that approximately one third of World Bank loans to Indonesia had
been siphoned off by bureaucrats reminds us of a 1995 survey that
ranked the country as the most corrupt in private investment.

The allegation was made last month by Prof. Jeffrey Winters of
Northwestern University, Illinois, and the survey was done by
Transparency International.

Although the focus of the expert (investments in the public
sector) differs from the focus of the survey (investments the
private sector), if we combine the two diagnoses, the saying
"nothing is well organized in this country except corruption"
seems not far from the truth.

To both Winters and Transparency International, the
bureaucracy is the source and venue of corruption. It would be
therefore quite relevant if we tried to reconstruct corrupt
practices and find breakthroughs to reduce the level of
corruption in World Bank-funded projects.

Corruption is everywhere, with its variables such as graft,
collusion and manipulation, and is a general phenomenon, the
oldest disease of a public institution called bureaucracy.
However, this disease becomes more chronic and institutionalized
in soft states like Indonesia and other developing countries.

The institutionalization of corruption can be seen as a
political symptom in a country where the bureaucracy plays a
central role that manifests itself as a "political clique". In
this condition personnel recruitment tends to be colored by
nepotism yielding in effect an unprofessional government and weak
supervisory instruments.

Although corruption is an economic issue, on a macroscale it
is linked with politics, a factor which alienates the masses from
the elite.

Why? Because those who corrupt public assets are those who
have access and authority in the distribution of the assets. Or,
in the case of bribes in project tenders in the public investment
sector, such as World Bank-funded projects, those who pay and
receive bribes are those who are close to the decisionmakers.
They are in a position to appropriate project funds so that only
a little is left for the poor communities which are the very
targets of the projects.

It is very hard indeed to determine precisely the percentage
of corruption in development projects managed by the government.
Nevertheless, if we study the planning, the tendering and the
implementation of projects, a number of sensitive points can be
identified.

First, for the sectoral department in charge of the project's
management, a project is an additional source of income so that
the markup of a project's scale and cost is kept confidential.
These practices have become common, with the low salaries of
civil servants even encouraging corruption so that it in fact
serves as a bonus, an incentive for them to work and get results.

Second, the process of transferring financial benefits from
the public to the private sector through direct assignment of
project management, privatization programs or concessions often
do not take place in a transparent way.

On a macroscale this has become increasingly institutionalized
in keeping with the practices of monopoly and oligopoly in our
economic system.

Third, the process of awarding bids for projects in the
provision of goods and services and in construction, both with
the central and the provincial administrations, is predominantly
determined by either family linkage or "good" relationships.

Failing either one of these conditions, one can still obtain
favor through the provision of money. Therefore, in the tender
process the phenomenon of entrenched corruption takes place and
the winner of the bid is engineered between the project leader
and the bidder based on material compensation.

Obviously a contract winner would have to manipulate prices,
volumes and technical requirements to make up for the phony
expenditures. In one research I found that in projects tendered
at the regional (kabupaten) level, a 10 percent stake of a given
project is put aside for the regent. An additional 2.5 percent is
needed when a project is carried out during special events, like
the general election for example.

Thus, a development project is no longer a provision of public
facility for the welfare of the community. For the bureaucracy,
it seems, a project is a means to reap an economic bonanza for
private interests.

If the World Bank has given an impression of passive tolerance
for corruption practices in Indonesia, it is apparently caused by
various factors including the role of the state as a pillar for
economic growth and a guardian of the sustainability of
development in general.

However, this has changed in the past five years. Indonesia's
private sector and foreign investment have increasingly taken
over the role of the state in economic growth as well as in the
production and marketing of goods and services.

Although the World Bank is testing projects to curb corruption
through cutting the chain of bureaucracy with programs like the
one for least developed villages, the village infrastructure
project and the district development fund, this endeavor has yet
to be qualified as an active policy of the World Bank in
Indonesia.

It is time for the World Bank to make a breakthrough to reduce
the level of corruption. First, an education program for
Indonesian journalists to enable them to investigate corruption
practices of project funds by the bureaucracy.

Second, the World Bank must involve NGOs in monitoring the
impact of projects funded by them and the use of the loans by the
bureaucracy.

The World Bank has successfully introduced these measures in
poor countries in Africa and was successful in reducing the
inappropriate use of loans. Why is the World Bank not interested
in doing the same in Indonesia, which is one of its biggest
clients?

The writer is a lecturer for post-graduate studies of social
sciences, University of Indonesia, Jakarta.

Window: If the World Bank has given an impression of passive
tolerance for corruption practices in Indonesia, it is apparently
caused by various factors including the role of the state as a
pillar for economic growth...