Winters says new government must be a clean break from past

JAKARTA (JP): The country needs a new, clean government with the credibility to demand the World Bank take responsibility for massive leakage and inefficiency in the use of its foreign aid, an American expert on Indonesia said on Monday.

Jeffrey Winters, an associate professor of political economy at Northwestern University in the U.S., said the founding charter of the World Bank placed a clear burden of responsibility on the bank to ensure its funds were not embezzled or misallocated.

He said it provided Indonesia with the legal basis to sue the bank in the International Court over misappropriation of its loans to the country.

"But the current government cannot do this because it is also part of the corruption," he told a seminar on Indonesia's overseas debt problem.

Many associate President B.J. Habibie and most of his Cabinet members with the corrupt government of his mentor, former president Soeharto. Habibie was handed power in May 1998 when Soeharto quit amid unrelenting student pressure, widespread unrest and the debilitating economic crisis.

Winters said the World Bank dispensed about US$30 billion in loans to Soeharto's government during its 32 years in power, with about a third of the total considered misappropriated.

"Criminal debt, or corrupted debt, refers to that portion of the total public debt that was stolen, diverted or pocketed by powerful individuals or groups in government," Winters said.

He added that corrupted debt was included in the national debt account which must be repaid by Indonesians, including the poor.

"If Habibie is reelected, Indonesia will lose up to $10 billion because a corrupt government can't demand the World Bank be partly responsible for the aid leakage," Winters said.

He said a new government should not hold links to the current status quo regime in order to solve both the mounting debt problem and the crisis.

The country is scheduled to elect a new president in November. Popular opposition leader Megawati Soekarnoputri and the incumbent President B.J. Habibie are the leading contenders.

Non-governmental organizations (NGOs) have urged Indonesia's major donors grouped in the Consultative Group on Indonesia (CGI) to halt any new loan disbursement to the country until a new government has been formed.

The NGOs made the demand due to the massive misappropriation of foreign loans in the country.

Despite increasing domestic pressure, both the World Bank and the government are proceeding with the scheduled two-day CGI meeting which starts on Monday in Paris. It will decide on new loans of between $5.5 billion to $6 billion to help finance the deficit of the 1999/2000 state budget ending in March 2000.

The World Bank is the coordinator of the CGI.

Several local economists have warned the danger of the country falling into a debt crisis similar to that experienced by Latin American nations in the 1980s unless the government comes up with a debt management strategy.

"This will be the biggest challenge of the upcoming new government," said economist Sri Mulyani.

She said the country's total foreign debt jumped to $152 billion as of March 1999 from about $110 billion before the economic crisis started in 1997.

The country's debt service ratio to export earnings is now nearing 60 percent, or twice as high as the precrisis level.

Sri Mulyani criticized the steep mark-up in costs of government projects funded by overseas loans, and the large number of loans used mainly in financing megaprojects which generated mostly rupiah revenues.

Meanwhile, economist Rizal Ramli said the government should consider asking for another debt rescheduling facility from its donors. He said it was justified because the country was facing another serious economic crisis and it always was a "good boy" in the past in diligently repaying its debts. (rei)