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.