International Policy

World Bank Funds 'Diverted' In Indonesia

As recently as July of last year, World Bank officials were strenuously denying that funds intended for projects in Indonesia were being siphoned off by the country's corrupt officials. But a World Bank internal memo, prepared by its Indonesian staff only one month later, estimated that at least 20 percent to 30 percent of funds supplied were being "diverted" to politicians and bureaucrats there.

  • According to the report, World Bank projects "are being implemented in an administrative culture which is not just tolerant of collusion and diversion of funds, but which blatantly expects civil servants to supplement their incomes by such means."

  • The report attributes much of the corruption to the Indonesian ruling party founded by former President Suharto -- involving state contracts with firms owned or controlled by government officials and their relatives.

  • The memo cited "numerous reports of diversion of 50 percent to 80 percent of funds budgeted for project land acquisition and resettlement assistance."

  • It found the worst siphoning of funds in the ministries of Home Affairs, Transmigration, and Forestry.

World Bank officials have refused to release the report, calling it "largely anecdotal." In denying allegations of corruption in a statement last year, Jean Michael Severino, World Bank vice president for East Asia, stated: "We know exactly where our money is going."

Source: Glenn R. Simpson, "World Bank Memo Depicts Diverted Funds, Corruption in Jakarta," Wall Street Journal, August 19, 1998.

 

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