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One-third of World Bank loans unaccounted for: US expert

Jakarta Post - July 29, 1997

Jakarta – About a third of the World Bank's loans to Indonesia have leaked and disappeared into the bureaucracy, an export on Indonesia's economy said yesterday.

Jeffrey A. Winters, an associate professor at the Northwestern University in Illinois, blasted the World Bank at a press conference hosted by the International NGO Forum on Indonesian Development (Infid). Winters blamed the World Bank's global "don't ask, don't tell" policy for the continuous theft of aid money.

The World Bank, one of the major contributors of international aid to Indonesia, announced July 17 in Tokyo, Japan, that it would increase its aid to Indonesia by US$300 million for 1997-98 to $1.5 billion. The World Bank office here refused to comment because i its director, Dennis De liay, was overseas.

Several government officials at the National Development Planning Board refused to comment on Winters' statement.

Winters estimates the World Bank has agreed to lend about US$20 billion to Indonesia since the bank was established in 1965 but the exact figure was not available froom the bank. Winters, whose doctoral studies focused on Indonesia and the World Bank, said the figure of a third of World Bank money disappearing into the bureaucracy came from one of the bank's former directors in Jakarta.

"Since then, half a dozen bank officials, both in Jakarta and Washington, DC, have given the same estimate. Indeed most have pointed out that 30 to 33 percent is a conservative estimate, and that such levels of theft and leakage are not uncommon in developing countries like Indonesia," Winters said.

He said it would be disastrous for the bank to admit publicly that loan funds were routinely stolen in Indonesia but that "they quite readily admit privately that such leakage is substantial". "One of the most disturbing aspects of the World Bank's close relationship with the Indonesian Government is that for three decades the bank has allowed a large proportion of its loan funds to leak into the government bureaucracy and disappear.

"The bank knows the money is being stolen, its staffers have a general sense of how large the problem is, but there is no concrete data on such theft because the bank does not collect such data," Winters said.

"In short, the World bank has a global policy of don't ask, don't tell," he said. Winters said the World Bank should immediately start assessing how much of the World Bank's total loans to Indonesia had been stolen. "Upon determining the level that has leaked into the bureaucracy, that amount should be forgiven," he said.

He said since the World Bank supplied funds in a continuous way it had to know that money was not being used as intended and that it was unfair that ordinary Indonesians, especially the poor, had to pay back these funds with interest. "If the average Indonesian received only two-thirds of the loan funds from the World Bank, why should they be required to pay back 100 percent with interest?" Winters asked.

"The average Indonesian does not have the power to impose limits on the actions of government officials. But the World Bank does have the leverage, and it should; begin to use it immediately," he said.