David E. Sanger, Washington – Top Clinton administration officials said Wednesday that they had pressed the World Bank to make sure that more than a billion dollars in aid to Indonesia was held up for several weeks so that the country's government could not use it to buy votes in the first free election there in more than 40 years.
The agency Wednesday announced that Indonesia had "voluntarily" agreed to a freeze in use of the money until the June 7 election is held, even though several hundred million dollars will be deposited in the next few days in an account under Indonesia's control.
The agreement reflects the depths of Washington's fears that the ruling Golkar party, dominated by President Suharto until his resignation a year ago, would use the money to remain in power.
Suharto's handpicked successor, President B.J. Habibie, hopes to retain the presidency after the parliamentary election, the first step in a lengthy process to select a president.
Treasury Secretary Robert Rubin on Wednesday told a subcommittee of the Senate Appropriations Committee that "Europe, the United States and others" felt that the aid to Indonesia "ought to be held up until after the election."
After Rubin's testimony, Treasury officials corrected his remarks, saying that some portion of the loans – by some accounts more than $400 million – would be made available almost immediately. Most of that money is to help Indonesia manage its water resources, and World Bank officials said several safeguards would enable them to track the money and make sure it was going to approved projects.
But the remaining $1.1 billion, about half of which was originally to have been sent to Jakarta's accounts Tuesday, has been held up. Much of that money is for what the World Bank calls "general budget support" to stimulate the economy, meaning that it would go directly to the government's main coffers.
As one US official said Wednesday, "The worry is that it would end up in little envelopes" in a country where corruption is endemic, and at a time when Habibie's party is suffering at the polls, partly because of the continuing disclosures of corruption and cronyism during the Suharto era.
Even without the World Bank money, much of which is to help provide a safety net for those who lost their jobs or fell below the poverty level during the Asian financial crisis, Jakarta has plenty of ways to lubricate the election process with cash. It could, for example, simply print more rupiahs, the nation's much-devalued currency, but Treasury officials say there is no evidence it is doing so.
The delay also gives the World Bank and the Clinton administration some breathing room to assess the outcome of the election. There are fears in Washington that if the Habibie government tries to rig the results, violence and political chaos could follow.
The fate of the Indonesia loans is considered particularly sensitive because the World Bank has acknowledged that much of its aid to the country has been misused or illegally diverted over the years. Critics of the World Bank and the International Monetary Fund have pointed to those diversions to press their argument that the United States should not be using taxpayer dollars, even indirectly, for such programs.