WB upbeat government can fight corruption

JAKARTA (JP): World Bank president James Wolfensohn expressed confidence on Friday that the Indonesian government would be able to confront and root out corruption, reduce the foreign debt burden and boost economic recovery.

Speaking to journalists after a breakfast meeting with President Abdurrahman Wahid and a number of Cabinet ministers, Wolfensohn said he endorsed Abdurrahman as someone who could provide cleaner leadership for Indonesia on the corruption front.

He said from his meeting with economic ministers on Thursday night that he found there was a very keen desire from the government to confront the issue of corruption.

"It's an issue that has been in the public eye for a long time here and what you need is sound, honest leadership and I think President Wahid is such a person. He certainly has my confidence," he said.

After meeting Abdurrahman, Wolfensohn left for the West Java capital of Bandung, where he was greeted by a demonstration of about 150 students.

They demanded Wolfensohn stop the bank's loans to Indonesia, which they said were corrupted by government officials.

The World Bank's image has been tarnished by allegations of mismanagement of its program in Indonesia. An internal World Bank report in 1998 alleged that up to 30 percent of its loans here were siphoned off.

A report this week on Australian television alleged that the Indonesian government used aid money from the World Bank to fund anti-independence militias that waged a reign of terror in East Timor in 1999.

Wolfensohn said here that the allegations surrounding the misuse of the bank's funds first surfaced last year, and the bank thoroughly investigated them at the time and found them to be baseless.

"It's an old story, we looked at the original evidence and we found no evidence," he said.

Wolfensohn, who is on a four-day visit in Indonesia, is scheduled to travel to East Timor on Monday.

He said with Abdurrahman as President, the bank was confident now that its loans to Indonesia were getting to where they were supposed to go.

"We now have a government that is keen to be transparent in where they spend the money," he said. "To the best of our knowledge, the money we're putting in now is arriving at the programs they're designed for."

The World Bank, a major lender to Indonesia, has lent more than US$12 billion to the country. It committed a further $1.5 billion for the 2000 budget year at a donors meeting last month.

The government's outstanding foreign debt is estimated to have reached $72 billion this fiscal year, ending March 31, which is a sharp increase from $68.4 billion in the previous 1998/1999 fiscal year.

In addition, the government has also booked a huge domestic debt, estimated to reach an equivalent of $74 billion by March 31.

Wolfensohn said the World Bank was continuing to pursue ways to soften Indonesia's debt burden.

"Indonesia, as you know, has a substantial debt and so the important thing is not to increase it unless you use the funding for social purposes," Wolfensohn said.

"We're also looking for ways where we can increase grantable funds."

Abdurrahman's administration has made it clear that it is seeking ways to lower its hefty foreign debt and is beginning to finance its budget domestically, through hiking tax revenue and selling and privatizing state assets.

Wolfensohn said he considered the government's 2000 draft budget, currently being debated at the House of Representatives, as sensible in terms of reducing budget deficits and keeping the economy moving forward.

"So I would say that after a very difficult period they're on track and that's the impression, I believe, of the (International Monetary) Fund as well," he said.

According to the Central Bureau of Statistics, Indonesia's economy grew better than expected to 0.23 percent in 1999, after contracting 13.2 percent in 1998.

The bureau estimated the economy should grow stronger by 4 percent this year.