WB tells Jakarta to get tough on corruption

Fabiola Desy Unidjaja and Dadan Wijaksana, The Jakarta Post, Jakarta

Apparently incensed by reports of widespread leakage affecting loans from the Consultative Group on Indonesia (CGI), the World Bank has urged the government to get tough on the country's endemic corruption.

World Bank Deputy Director for Asia Pacific Jemal-ud-din Kassum told President Megawati Soekarnoputri Friday that eradicating corruption was necessary to create a conducive investment climate.

"Corruption is always discussed and the World Bank would like to see serious action (taken against embezzlers)," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said after accompanying President Megawati during her meeting with Kassum.

However, the World Bank, one of the country's biggest donors, did not say whether or not it would stop giving loans to Indonesia if it failed to put an end to corruption.

There is no confirmed figure yet as to just how much money is lost to corruption, but according to Kwik Kian Gie, the outspoken State Minister for National Development Planning, rampant corruption was costing the country some $28.4 billion per year.

This means that if the efforts to curb corruption were successful, Indonesia would not need the help of foreigners for its development financing.

The World Bank's call came amid reports that at least 20 percent of CGI loans for infrastructure projects were being siphoned off annually by corrupt officials during implementation.

Non-governmental organization Indonesian Corruption Watch (ICW) said earlier that corruption was worse now under Megawati than under the leadership of former dictator Soeharto.

During the Soeharto regime, according to ICW, corruption was committed by the Soehartos and their cronies only, while under the administration of Megawati, who took over the national leadership in July 2001, corruption was the domain of virtually all members of the political elite.

Corruption is not only engaged in by the political elite here in Jakarta, but even more so now at the regency and municipality levels, where mayors and regents have become mini potentates overnight with seemingly unlimited powers following the introduction of local autonomy in 2001.

Kassum, who was also present during the press conference, stressed that financial aid to the country would, to a great extent, be determined by whether or not there were leakages.

"Making sure that the money goes where it is needed has been the central driving force for donor programs in Indonesia, and will continue to be so," Kassum emphasized.

Extensive corruption was widely blamed for plunging the country into the deep economic crisis that led to the downfall of strongman Soeharto in 1998 after he had ruled the country for more than three decades.

On Friday, the Supreme Audit Agency (BPK) admitted that a significant portion of foreign loans were being misused.

BPK chairman Satrio B. Judono said that embezzlement was occurring in various overseas-funded projects across the country, mostly at the hands of corrupt officials, with the rate of leakage estimated at above 10 percent on average.

"The embezzlement is occurring in various departments," he said.

Satrio's words came only a day after the National Development Planning Board (Bappenas) gave a warning that the country might lose some 20 percent of the funds pledged recently by the CGI, as had been the case for years, due to corruption.

The Board's executive secretary, Koensatwanto Inpasihardjo, said that the leakage was caused largely by mark-ups in project costs.

The CGI, a grouping of the country's major bilateral and multilateral creditors, granted US$2.7 billion in fresh loans to Indonesia on Thursday to help cover the 2003 budget deficit.

Kassum refused to comment on the possible misuse of the CGI loans saying that: "I have not seen the report as substantiated."

He underlined that donor countries were taking serious steps to ensure the proper use of the money and guarantee transparency in funds disbursement.

"We are all very committed to eliminating misuse of our funds and the public's money," Kassum said.