Marianne Kearney, Jakarta – Donor countries and international aid agencies say that President Abdurrahman Wahid's handling of the Buloggate scandal will indicate how committed his reform government is to driving out corruption.

Foreign observers, including those from major donor countries currently pouring millions of dollars into governmental and legal-reform programmes, say they will be monitoring closely how the scandal unfolds.

But they add it is too early to tell if the President's inner circle has been tainted with corruption. "How it is handled is the key. If in the next two weeks, people start to say that was a real snow job, and there was a real attempt to cover up, then something has gone really wrong," said one Western observer.

The observer points out that, so far, this scandal looks far more amateurish than Baligate, indicating that those involved are not as experienced at hiding money as the actors behind the previous scandal.

In Baligate, 546 billion rupiah (S$114.7 million) from the Bank Restructuring Agency deposited into the bank accounts of some close associates of Golkar chiefs, reportedly for election funds, disappeared. Nobody has been prosecuted.

As a result, the International Monetary Fund suspended its loan programme. Mr Ravi Rajan from the United Nations Development Programme, one of the aid agencies promoting reform, said it was too early to tell if the UNDP would reassess the government's commitment to reform in light of the new scandal.

However, Western sources also said that regardless of whether Buloggate uncovered even small-scale corruption, it would be a strong indicator of just how transparently and efficiently the palace was run.

The fact that Mr Abdurrahman was looking into the possibility of using funds from the National Logistics Agency (Bulog) for a government project, even if it was the very worthy cause of humanitarian aid in Aceh, has raised eyebrows.

It also begs the question of why the President needed to go to Bulog when he could easily obtain the funding from the Finance Minister, said observers. It suggested, said one observer, that palace business, just like during the Suharto era, appeared to be organised along personal networks. Another foreign analyst agreed that even if corruption was absent, the suggested lack of accountable systems was disturbing.