World Bank acts firmly

World Bank acts firmly

The World Bank, apparently determined not to repeat its past
mistake of glossing over corruption in Indonesia, has acted
firmly in safeguarding its aid. In what could be the most
assertive stance it has ever taken in a policy dialog with the
government, the bank decided to delay the disbursement of US$600
million in adjustment loans for the social safety net program,
originally scheduled for March 31, until after the June 7 general
election.

An executive of the bank in Jakarta was quoted by the Asian
Wall Street Journal on Tuesday as saying that the bank was
concerned the loan might be misallocated because of disagreement
with President B.J. Habibie on anticorruption measures to protect
the social safety net program. The newspaper said the bank was
afraid the ruling Golkar party would use the assistance funds to
support its reelection bid.

The drastic move, at first glance, seems rather inhumane,
given the large number of impoverished people in need of critical
social welfare support. The decision also seems to contradict the
bank's current country assistance strategy, which places the
highest priority on the reinforcement of social welfare
assistance to protect the poor and preserve human assets.

One may also wonder whether the multilateral development
agency, after more than 30 years of working experience in
Indonesia, is so out of its mind that it does not fully realize
the nation's future depends primarily on the government's ability
to alleviate poverty in order to maintain social stability and
domestic confidence.

However, the bank's concern is quite legitimate. Given
Golkar's obsession with retaining power and its willingness, and
ability due to its incumbent position, to resort to any lengths
to win the coming election, the World Bank risks being accused of
supporting Golkar -- and consequently setting off a devastating
social and political backlash -- if it allows its aid to be
abused for Golkar's campaign. Reports already abound of officials
in charge of distributing aid to the poor claiming the assistance
was donated by Golkar.

The bank has every reason to be extra careful with the
adjustment loan. First, because the bank itself has little
experience in managing such cash loans. Its lending portfolio has
so far consisted almost entirely of project-tied aid, for which a
monitoring and evaluation mechanism has been established. The
bank also has come under fire for what domestic and international
economists have criticized as its blatant tolerance of widespread
corruption in Indonesia during the three decades of the Soeharto
regime. In fact, the bank conceded in an internal evaluation
report in February that it had contributed to Indonesia's
economic implosion by virtually closing its eyes to the pervasive
corruption in the country.

All these factors, in addition to the Habibie administration's
half-hearted battle against corruption, as demonstrated by the
inertia of the Attorney General's Office in prosecuting officials
suspected of graft, has forced the bank to insist on a special
monitoring mechanism as a prerequisite for disbursement of its
social safety loans. And the World Bank is not the first foreign
donor to doubt the government's ability to distribute aid in a
transparent and accountable manner. Fearing official
mismanagement, several foreign governments have disbursed their
humanity aid partly through non-governmental organizations.

It is not clear from the newspaper's report what was the main
hurdle to an agreement on a monitoring mechanism for the program.
But it is most unfortunate that such sorely needed aid has to be
delayed in spite of thorough preparations begun several months
ago. The bank has held a series of meetings with NGOs and media
leaders over the past few months to discuss measures to ensure
the safety net money reaches its target beneficiaries. The bank
has insisted that civil society and NGO representatives be
involved in whatever monitoring mechanism is eventually put in
place for the program.

This last minute hitch, if not resolved immediately, could
put the government at risk of losing what little trust it still
has of other international aid donors.