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US House speaker blasts World Bank

Source
Reuters - August 20, 1998

Atlanta – US House Speaker Newt Gingrich on Thursday criticized the World Bank for letting money go to waste in Indonesia, after an internal report said that bank funds may have been siphoned off by government officials.

"It's a double waste. First of all, it's a waste of honest taxpayers' money to allow it to be used," the Georgia Republican told business leaders in Atlanta. "But second, when you have a system where every fifth dollar goes for corruption, you are propping up the very people who are sickening the society."

The internal World Bank report, which was prepared in August 1997 by bank staff in Jakarta but not made public until this week, said Indonesian officials may have pocketed or diverted more than one-fifth of World Bank development funds sent to the country. But the World Bank said its own staff had "not been implicated in any form of misconduct," and that bank procedures had been tightened since the year-old memorandum was written, to prevent loans from being misused.

In response to the report, Indonesia's top economics minister, Ginandjar Kartasasmita, told reporters in Jakarta that the government would take action against corruption.

The World Bank has loaned Indonesia more than $24 billion since 1967, with credits designed to reduce poverty, build a functioning infrastructure and speed economic growth. Last year, the World Bank pledged $4.5 billion to support a $43 billion Indonesia rescue package led by the International Monetary Fund after Asia's financial crisis took hold.

"The challenge in Indonesia is not money, it's corruption," Gingrich said. The World Bank announced in July that it had hired outside auditors to investigate possible embezzlement and kickbacks involving its own officials.

Worried by these reports, the US Senate Appropriations Committee voted to hold back US funding for the World Bank until congressional experts reviewed allegations of corruption in bank lending operations.

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