World Bank delays funds for RI

World Bank delays funds for RI

HONG KONG (Agencies): The World Bank has delayed the payment of a US$600 million loan to Indonesia, after it failed to reach agreement with President B.J. Habibie's government on new measures to monitor the allocation of the funds, a report said Tuesday.

The World Bank decided to delay the loan, earmarked to support reforms in the Indonesian government's poverty-alleviation program, over concerns the money would be misused ahead of the June parliamentary elections, the Asian Wall Street Journal said, citing bank officials.

The report said the bank would not disburse the money until a new monitoring mechanism to better track the funds had been settled on with the Indonesian government.

The funds were originally planned to be released on March 31, but activist groups and opposition parties in Indonesia asked the World Bank to withhold disbursement until after the June 7 ballot, the newspaper said.

The opposition figures feared the ruling Golkar Party could use the money to support its re-election bid.

"The World Bank's funds rarely reach the right people and instead are used for money politics," Wardah Hafidz, coordinator of the Urban Poor Consortium, was quoted as saying.

Mark Baird, the World Bank's new Indonesia country director, told the daily that the bank took seriously allegations that aid money might be abused for political reasons. In the past year, there were reports of mismanagement of World Bank funds in the country.

But Baird said the severity of Indonesia's economic crisis meant it was better to disburse the money immediately if the government enacted reforms.

"If it's a choice between disbursing the money and staying engaged with government or not disbursing before the election, I'd choose disbursing," said Baird, adding "we can't be seen as taking sides."

The World Bank has pledged Indonesia $4.5 billion as part of a wider bailout package led by the International Monetary Fund in last 1997.

It increased the pledge to $5.5 billion last year, but so far has yet to disburse even half that amount.

Separately, an American official said in Jakarta on Tuesday that the U.S. Department of Agriculture has suspended a $400 million GSM-102 credit guarantee scheme to Indonesia after an Indonesian bank failed to make a payment, a U.S. government official said Monday.

"Whenever there is a non-payment, the program shuts down for the whole country," the official said.

The missed payment was linked to one of the 38 banks that the Indonesian government shuttered last month, but the official said after the suspension, the payment was made. The bank wasn't identified.

"We were amazed at how quickly the Indonesian government made sure the payment was made," the official said, adding that the credit guarantee would be back in place as soon as "the end of the week."

The GSM-102 export credit program allows the USDA to guarantee loans from U.S. banks to foreign banks for the purchase of U.S. commodities.

For Indonesia, the program covers over 20 commodities but is primarily used for cotton and soybean imports.

Thus far $69 million of the program - which runs on a 12-month basis starting in October - has been utilized. For the 1997-98 year, $166.9 million was used and the year before $203.2 million was tapped.

The official said that prior to the deregulation of commodity imports, only the National Logistics Agency, or Bulog, had access to the facility, but now private traders are actively tapping it.