WB rejects reports on graft figure

JAKARTA (JP): The World Bank's country director for Indonesia, Dennis de Tray, rejected reports yesterday that more than 20 percent of the bank's loans to finance projects in the country was siphoned off by local officials.

The 20 percent figure is not really a concrete fact because no systematic research has been conducted to reach such a conclusion, he argued.

"I don't deny the problems (of corruption in Indonesia)... but the 20 percent figure is anecdotal. I don't know where the report got the figure," he told reporters after a meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

De Tray was commenting on a report in the Asian Wall Street Journal on Wednesday that quoted a World Bank internal memorandum stating that officials in Jakarta were believed to have siphoned off more than 20 percent of the bank's money earmarked for the country.

Meanwhile in Washington, World Bank East Asia and Pacific director Jean-Michel Severino acknowledged that the 20 percent figure was mentioned in a 1997 internal report.

"This number was mentioned in the report because it was suggested that corruption was substantial," Severino said in an interview with Bloomberg News on Wednesday.

"We have absolutely no idea whether this is a correct number."

The World Bank denied in a written statement that any of its staff members were involved in taking money from loans that were designed for development projects. The international lender has committed about US$23.4 billion to the country since 1967.

The World Bank has not asked the government for restitution of lost project funds because "it would mean we would have a precise idea of the damage", Severino said.

The bank has indicated it does not intend to stop its loan program to the country.

Nonetheless, he voiced confidence that the new Indonesian government under President B.J. Habibie would eradicate corruption from the system.

Habibie was installed in May to replace president Soeharto, who was run out of office after antigovernment riots, sparked by his failure to implement adequate economic reforms, tore apart Jakarta and other cities in the country.

Last year, Severino flatly denied a statement made by Jeffrey A. Winters, an American associate professor at Northwestern University, Illinois, that about 30 percent of the money lent to Indonesia by the World Bank routinely disappeared somewhere inside the Indonesian bureaucracy.

"We have checked his claim which he has made in the past and found nothing to support such an estimate... Indonesia retains one of the best records of successful project implementations of any of our client countries," Severino asserted in a statement.

Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Sastrosoenarto said yesterday he would arrange a meeting with World Bank officials and the country's Development Finance Comptroller (BPKP) next week "to get more information about the graft report".

"We will give a positive response to the report," he told reporters after a ceremony installing some 120 new senior officials in the ministry.

Hartarto promised to investigate the corruption allegation and forward findings to the Attorney General's office should there be any indications of wrongdoing.

He added that to eradicate corruption in the country, state- funded projects should go through a transparent tender process.

Economist Kwik Kian Gie said that it was impossible to imagine how overseas loans were not being ill-used by Indonesian officials because of the rampant corruption practices throughout the country.

"I think the 20 percent figure is very realistic," he told The Jakarta Post yesterday, pointing to various findings made by prestigious international institutions and local economists who have ranked Indonesia one of the most corrupt countries in the world with a 30 percent to 40 percent leakage in the state budget.

"I'm not surprised that World Bank officials in Jakarta have also been contaminated by the corruption disease," he said, referring to the bank's constant denial on findings of rampant corruption practices in Indonesia.

Kwik worried that the $14 billion in aid from the International Monetary Fund and the Consultative Group on Indonesia donor countries for this year would also be siphoned off by local officials.

The international aid is intended to finance various subsidies to help the poor survive the country's ongoing economic crisis.

The entrenched culture of corruption in the country is widely seen as one of the factors that caused the crisis.

During Soeharto's 32 years in power, the World Bank and other lenders often praised Indonesia for its rapid economic growth and poverty eradication.

The regime was also regularly voted among the most corrupt in Asia, with key contracts often awarded to relatives of Soeharto.

Such problems were easy to ignore because of a muzzled press and an economy that grew 7 percent a year for two decades.

Corruption became a sore point last August when the rupiah slumped and the economy deteriorated, forcing the country into its first recession in three decades.

The World Bank expects Indonesia's economy to shrink 15 percent this year. (rei)