Matthew Moore, Jakarta – The World Bank has announced an ambitious new lending program for Indonesia where money will go to organisations or local governments that can show they have taken steps to wipe out corruption.
Announcing a four-year strategy for one of the world's most corrupt countries, the bank's director for Indonesia, Andrew Steer, said the bank had agreed on a series of "triggers" that would see lending increase if certain goals were met.
In the past the bank had "run a mile" when asked to face up to the corruption endemic in Indonesia, he said. Now it had decided to confront the issue head on because it believed corruption was a fundamental reason investment had dried up and the poverty level remained stuck at 16 per cent.
Services such as health, education and sanitation were woefully inadequate for a country of Indonesia's wealth and corruption was now seen as the major obstacle preventing improvements in those areas.
"Our entire program will be focused on helping to improve the quality, responsiveness and accountability of public institutions as they seek to promote development," Mr Steer said.
"All local governments need better roads, schools, clinics, irrigations etc, but we will give preference to those that are willing to adopt more transparent, accountable efficient and pro-poor approaches."
Because the World Bank says it does not know how successful its strategy will be, it has decided to lend Indonesia between $US450 million and $850 million each year depending on whether local governments sign its plan to foster good governance. Should Indonesia perform exceedingly well, the bank says it will increase lending to $1.4 billion a year from the average of $400 million over the past three years.
In its country assistance strategy released yesterday, the bank said corruption remained a huge problem five years after the fall of the dictator Soeharto.
The report says: "The achievements of the past few years continue to be clouded by widespread concerns about governance and corruption across Indonesian society. The high hopes that the Reformasi movement would break the hold of the vested interests and the corruption, collusion and nepotism that characterised the later years of the Soeharto era have not been realised.
"Few have been held to account for the theft of public resources and there are signs that 'money politics' is at work, allowing old elites to reacquire their previous assets and new elites to consolidate their positions." The bank has admitted its own reputation is still damaged as a result of its past support for the Soeharto regime and its practice of turning a blind eye when its funds were siphoned off by Soeharto's family and friends. That history of tolerating corruption had seen organisations such as the World Bank accused of contributing to the problem.