Fri, 12 May 2000

World Bank wants good governance, anticorruption

JAKARTA (JP): The World Bank has again called on President Abdurrahman Wahid's administration to pursue good governance and anticorruption measures to improve confidence in public institutions and development programs.

The bank's country director for Indonesia Mark Baird said at a seminar on Thursday the new government was committed to fighting corruption.

"But progress has been painfully slow," he said.

He suggested the government, together with the House of Representatives (DPR), accelerate judicial reform to restore confidence in the country's legal system.

"It is essential to restore confidence in the courts, so that contracts can be enforced and those involved in corruption can be held accountable," he said.

To reduce corruption in the bureaucracy, Baird said, there was a need for fundamental reforms in the civil service. But higher salaries alone, without accountability, would not suffice to root out corruption.

Decentralization and greater regional autonomy, if implemented properly, could reduce corruption because they involve broader participation in development projects, he said.

"Decentralization needs to be managed carefully, and local governments need to gear up quickly to handle their new responsibilities," he said. "Not doing so will increase the risk that quality of service delivery will actually decline."

In addition, Baird said, government procurement systems and financial management needed to be strengthened at all levels of government.

He said corruption, which had become rampant in the latter years of the Soeharto regime, was raising some serious questions about the sustainability of the development process in Indonesia and the role of the World Bank.

"Although the World Bank maintains tight controls over the use of its funds, we cannot fully isolate our operations from problems of systematic corruption.

"This is a major concern to our shareholders and civil society groups in Indonesia," Baird said.

To help reduce the level of corruption in Indonesia, Baird said the bank was strengthening control mechanisms in every project it financed.

Besides corruption, he said the World Bank was also concerned about the country's exploding debt, from a precrisis level of 24 percent of gross domestic product to more than 92 percent now.

According to the Bank, total government debt rose from US$51 billion in March 1998 to $147 billion today. Almost all of the recent increase in debt is due to the domestic cost of recapitalizing banks. The government's external debt is now $63 billion, of which about $12 billion is owed to the World Bank.

He said this high level of debt severely limited the capacity of the new government to borrow and spend on development programs and that debt servicing would absorb 45 percent of government's revenue in the current fiscal year.

The World Bank, Baird said, supported the government's efforts to seek and obtain debt rescheduling, and it had canceled undisbursed commitments of its loans to Indonesia and renewed Indonesia's access to the bank's International Development Assistance (IDA) soft loans.

"We expect lending by the World Bank to decline from the exceptional levels of the past few years," Baird said.

The bank, he added, had pledged to disburse $1.5 billion during the current fiscal year, but this may well be reduced in line with the lower borrowing requirement approved by the House.

He said the bank would phase out general budget support loans and would shift back toward financing development programs focused on poverty reduction.

He noted that good governance and anticorruption measures, equal opportunity and access for the poor as well as economic recovery and sustained growth would play an important role in any of the Bank's poverty-reduction strategies in Indonesia. (rid)