Indonesian experience casts doubts on Bank anti-corruption efforts

28 January 2003

In recent years the World Bank has made much of its commitment to combating corruption. But a recent briefing by Down to Earth – the International Campaign for Ecological Justice in Indonesia – complains that in Indonesia the Bank’s Department of Institutional Integrity has not been sufficiently transparent and achieved limited results.

This is partly because the Bank has an incentive to maintain high levels of lending, even if this means turning a blind eye to money going missing.

By June 2002 the Bank office in Jakarta had received 231 corruption-related complaints, most of them alleging procurement irregularities. Seven cases involved specific allegations relating to bribery and misuse of funds. One hundred and ninety cases had been reviewed by Bank staff and the Government of Indonesia and considered closed.

The Bank says that actions taken relating to these complaints include barring firms from participation in future procurement, the government refunding the Bank for expenditures which were ineligible for Bank financing, re-tendering of procurement, and sanctions by government for fraudulent advertising.

But Down to Earth complains that the Bank “does not disclose critical information, such as the time frame for reviewing a corruption allegation, number of cases received within a certain period of time, types of cases, actions taken on each case and how proven corruption cases are settled”.

The Bank’s Department of Institutional Integrity conducted an audit on the Bank-funded Sulawesi Urban Development Project II (SUDP-II) in early 2002. Despite a severe problem of missing documentation, the review found evidence of collusion among bidders and common ownership of shell companies. The review also found inadequate project oversight by implementing agencies and consultants, which resulted in contract non-compliance, failure to complete work, and changes in contracts without appropriate approvals. Similar problems were found in financial management.

Even some Bank staff have expressed scepticism about the seriousness of this review. John M. Miller, Team Leader from 1998 to 2002 of the Project Coordination Office of SUDP-II, categorized the Bank as a willing partner in the corrupt system in Indonesia. The Bank’s focus, said Miller, has always been on “pushing money” rather than on the quality of loan design and preparation.

The World Bank’s Anti-corruption Strategy and Institutional Integrity Department: – Effective in Combating Corruption?, Down to Earth Factsheet, December 2002

Department for Institutional Integrity, World Bank

Good governance and the World Bank

Bretton Woods Project briefing evaluating the key questions raised by the Bank’s market-centric approach to reforming states and institutions.