World Bank finds graft in poverty alleviation program

World Bank finds graft in poverty alleviation program

Urip Hudiono, The Jakarta Post, Jakarta

In yet another shameful public expose of how rampant graft
practices in the country are, the World Bank announced on
Wednesday from Washington that it had blacklisted two Indonesian
firms and five individuals implicated in the misuse of a
US$203,000 grant.

What makes the scam even more disgraceful is the fact that the
grant -- which the Bank had provided under the Asia Europe
Meeting-European Union (ASEM-EU) Asian Financial Crisis Response
Trust Fund -- was for the purpose of safeguarding and monitoring
the social safety net programs for the poor in the country.

The exposure of the case also came at a time the Washington-
based bank had been entrusted to manage a $500 million multi-
donor trust fund for the Aceh tsunami disaster, and the
government pledging to ensure the accountability of the funds.

The Bank said in a written statement that it had found
evidence of "misrepresentation of bona fides, bid collusion and
kickbacks" that the firms and individuals had been involved in
during the grant's implementation.

The Bank listed the firms and individuals in the statement as
PT Pemeta International and PT Planosip Nusantara Engineering,
Planosip's managing director Mohammad Mansoer, Ade Imam Budiman,
Luthfi Djatnika, Hary Kustiawan and Triko Eko Warso.

Explaining further the kickbacks, the Bank said that the firms
and individuals -- except for Planosip and Mohammad Mansoer --
had been engaged in a corrupt scheme whereby approximately 94
percent of the value of a $33,000 contract was paid as a kickback
to officials working for the project's implementing agency.

The grant -- totaling $573,025 of which only 203,000 was
disbursed -- was implemented by the National Development Planning
Agency's (Bappenas) Regional Planning and Control Project unit.

As consequence, the blacklisted firms and individuals would be
ineligible to receive any new World Bank-financed contracts for
up to three years.

No explanation was given on the Bappenas officials, although
the Bank said that the full amount of the project funds involved
in the scheme was later refunded by the government to the World
Bank.

Commenting on the case, country director Andrew Steer said
that the World Bank had always, and would continue, to deal
firmly with any misappropriation of its grants.

"As this case shows again, we will be vigilant with regard to
the use of Bank funds," he said, reiterating that World Bank
funds must go to help alleviate poverty among the people of
Indonesia.

"When we find instances of fraud and corruption, we will
report them openly to the government and work with them to see
that action is taken."

Separately, the Asian Development Bank (ADB) acknowledged in
its recently published Investment and Productivity Study that
corruption was still one of the greatest obstacles to Indonesia's
economic and social development.

"Corruption undermines development by distorting the rule of
law and weakening the institutional foundation on which economic
growth depends," the ADB said.

"Corruption also stifles private sector growth and hurts the
poor because it diverts public services from those who need them
most."

The ADB conducted the study in 2003 with the World Bank, the
Office of the Coordinating Minister for the Economy and the
Central Statistics Agency, surveying a total of 713 firms in the
country.

Up to 38 percent of the firms said that corruption was a major
or very severe constraint on their businesses.