World Bank's Guilt on Indonesia Corruption

By Abid Aslam

WASHINGTON, Feb 14 (IPS) - The fall out over the news that the World Bank failed to confront--and even colluded in--gross corruption in the regime of ousted Indonesian President Suharto has cast a pall over the institution's activities in Asia and elsewhere in the developing world.

An internal Bank report leaked to the media in the past week offered the clearest picture yet of the agency's role in building and sustaining the "myth of the Indonesian miracle."

The document would no doubt affect discussions at a Bank-sponsored Feb. 26-27 conference in Seoul, South Korea on 'Democracy, Market Economy, and Development', analysts said. Bank officials have been hyping the meeting as a watershed in the agency's work on governance issues.

The report, prepared by an internal evaluation unit which answers directly to the agency's 24-member executive board, has surfaced just as the Bank is ready to deliver to Jakarta the final 400 million dollars of a one-billion-dollar 'policy reform support' loan approved last year. It also comes amid an effort by the Bank's staff association to spruce up the agency's image.

Suharto was forced from office last year by economic upheaval and political unrest--but not before the Bank loaned his government some 25 billion dollars over its 32-year lifespan, making it one of the agency's biggest borrowers. Critics blasted the agency for colluding with the 'New Order' regime, which for years was considered one of the most corrupt in the world, but the Bank admitted only that it had gone along with government claims of epic improvements in living standards. The internal report lambastes staff performance in the Bank's 'resident mission' in Jakarta but does not pursue higher-ups charged with supervising the country office.

"Perhaps the bank tried to preserve the image of the Indonesian miracle for too long," the report says. "Perhaps the bank was too concerned with maintaining good relations with one of its best clients."

Or perhaps, it adds, Bank staff were too keen to boost their own careers by embellishing assessments of their work and appearing to play a key role in a country "widely perceived within the Bank to be a miracle and a symbol of the Bank's success."

Taking the gloss off the picture would only tarnish Bank staffs' reputations, so they had little incentive "to take a close look at Indonesia's development model," according to the report. It describes the agency's record of lending in the Southeast Asian country as "marginally satisfactory."

"With a large and well-established mission in Jakarta, Bank staff were aware of the country risk. The mission had easy access to senior officials who frequently prepared confidential policy notes" and therefore could have played an effective reformist role, the report says.

Nevertheless, according to the document, "Bank management was ambiguous in its messages to the Indonesian government. Strongly worded policy notes on major structural issues were mixed with constant and vocal praise for the government's performance, and significantly contributed to complacency."

As a result, "corruption has been and continues to be a problem in Indonesia," it adds.

Last October, another internal Bank report estimated that "at least 20-30 percent of GOI (Government of Indonesia) development budget funds are diverted through informal payments to GOI staff and politicians, and there is no basis to claim a smaller 'leakage' for Bank projects as our controls have little practical effect on the methods generally used."

The October "operational overview" suggested that the roots of Indonesian graft lay in Javanese culture but admitted that "many of our own staff (particularly headquarters task managers) are viewed as ignorant or uncaring (as in 'they don't really want to know') of local practices and thus subject to being misled or deceived rather easily." It also blamed the civil service pay system, which dates back to the Dutch colonial era and relies heavily on project bonuses, for "leaving nearly all civil servants in constant search of supplemental income."

The Bank's latest report was completed last week and, according to some internal sources was watered down to appease Indonesian officials to whom an earlier draft had been shown. It comes just as the head of the agency's staff association is launching an effort to improve his colleagues' image.

Jamil Sopher, in a memo to fellow staffers, complains about the "terrible beating in the media over the past 15 years" and asks them to contribute to an anthology of anecdotes about "life in the trenches and on the front lines of the Bank group's war on poverty."

These, he hopes, will serve to rebut media depictions of Bank staff as "overpaid and underworked bureaucrats...who travel first class and dine in Bank cafeterias on Cotes de Veau and Cote du Rhone".

Contrary to that stereotype, many at the Bank "have subjected themselves to brutal travel schedules, forsaking health and immediate family, because of their commitment to the poor," according to Sopher.

Yet, he adds, "We are consistently characterised as supporting entrenched regimes and enabling the elite to get richer while the poor sink deeper into poverty under the weight of Bank-sponsored programmes to increase taxes, increase food prices, increase electricity rates and increase irrigation charges."

To redeem staffers' image, "no anecdote is too small or too trivial," Sopher assures his co-workers. If their tales turn out to be entertaining, "so much the better."

Copyright 1999, Inter Press Service