NCPA - National Center for Policy Analysis

World Bank Admits It Goofed Badly In Indonesia

February 11, 1999

The World Bank has completed what some observers are calling "a blistering evaluation" of its operations in Indonesia over the years. The internal report says the bank knew of many problems but did not want to offend the government of President Suharto or threaten the image the bank had promoted of Indonesia as one of its great success stories.

  • The report charges that World Bank officials turned a blind eye to Indonesia's corruption, growing repression and collapsing financial system in the final years of Suharto's 33-year rule.
  • Indonesia is one of the leading recipients of World Bank funds -- with more than $25 billion having been spent on development projects over three decades.
  • The analysis documents how country specialists continued to issue rosy reports to the bank's Washington headquarters even after the financial crisis spread throughout Southeast Asia in the fall of 1997.
  • It also recounts how its sister institution, the International Monetary Fund, "reached a stage of open confrontation" with Suharto a year ago, as he tried to save his family and friends from financial ruin at the expense of the country's economic future.

The report concludes that the bank's overall success was only "marginally satisfactory" -- largely because it paid too little attention to the country's sick banking system and Suharto's refusal to reform the legal system and open up politics.

Source: David E. Sanger, "World Bank Beats Breast for Failures in Indonesia," New York Times, February 11, 1999.


Browse more articles on International Issues