While expressing confidence over progress in the country's economy, the World Bank has stressed the need for the government and legislature to boost efforts to root out rampant corruption.
In a meeting Tuesday between visiting World Bank president Paul Wolfowitz and President Susilo Bambang Yudhoyono, the bank expressed its concern over the continued problem of corruption here despite recent crackdowns.
In a press conference after the meeting, Wolfowitz urged the country to further clean up its notoriously corrupt bureaucracy and judicial system so as to attract more investment and thereby stimulate economic growth.
"Indonesian investors will tell you the same thing, that the biggest discouragement to investing your money here is corruption. This problem is something that needs to be tackled across a whole range of initiatives," said Wolfowitz.
"You need to press for a clean and honest government, and a clean and honest court. I think the court system is one of the challenges here. A good court will bring investments here and will eventually develop the economy and reduce poverty," he said.
In its recent report, Doing Business in 2006: Job Creation, the Washington-based multilateral lending agency highlighted how corruption in Indonesia was rooted deeply within the bureaucracy, as clearly revealed when investors tried to set up business here.
Besides lengthy and complicated processes for securing business approvals, demands for bribes and unofficial fees also played a role in scaring away potential investors. In some cases, there was actually no guarantee that the approval would be issued on time even after unofficial fees or bribes had been paid.
"I think it is also important to understand that corruption is not something that can be dealt with by a stroke of the pen or by a decision of the President, no matter how significant those decision may be," said the former U.S. ambassador to Indonesia.
"It really requires the participation of the whole people, and the whole-hearted support from the parliament."
Yudhoyono, speaking to Asian police officers earlier Tuesday, said the fight against corruption would not see significant results for another generation.
"Fighting corruption is a long time effort," he was quoted as saying by AP. "I might be overoptimistic but I believe that corruption can be significantly reversed in one generation."
Wolfowitz also said that the bank, one of the country's major lenders, had allocated around US$900 million in loans to Indonesia this year to help the government boost economic growth, reduce poverty and institute better governance.
Around $200 million of the loans would have highly favorable terms, such as low interest rates and long repayment periods.
On top of that, the World Bank's investment arm, the International Finance Corporation (IFC), has provided about $237 million in lending capital this year to help expand the country's private sector.
The World Bank's loan pledges will be made at the upcoming Consultative Group on Indonesia (CGI) meeting in June, where Indonesia's 32 traditional foreign lenders will decided on the size of the loans to be disbursed this year.
Last year, the CGI channeled around $3.4 billion to the cash-strapped government, consisting of $2.8 billion in loans and another $600 million in grants to help cover the budget deficit and fund public infrastructure development.
In a sign of World Bank confidence in the country's economy, it is planning to increase its lending limit from less than $900 million in previous years to around $1.4 billion this year.
"Indonesia is now performing well enough to qualify for up to $1.4 billion. We look at the performance of the economy and the amount of the debt. The country's debts to the World Bank have been falling rapidly," World Bank country director for Indonesia Andrew Steer told reporters.
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