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.