A letter to the World Bank


Stephen Pickford
UK Executive Director
World Bank / International Monetary Fund
700 19th St, NW
Washington DC
Fax: 001-202-623-4965
19th May 1999

Dear Mr Pickford

We are writing to draw your attention to a letter to the Executive Directors of the World Bank, signed by hundreds of Indonesian anti-poverty, church, human rights, legal aid, anti-corruption and environmental groups (attached). In it, our Indonesian colleagues call on the World Bank to delay the disbursement of a $600 million Social Safety Net Adjustment Loan and a $400 million Policy Reform Sectoral Loan for the Government of Indonesia until after the elections and the Presidential selection.

We urge you to pay heed to the appeal by these Indonesian civil society organisations for the following reasons:

We consider that you should be concerned about these issues in the context of the UK government’s current contributions to the Bank of some $540 million. Furthermore, the UK Government’s 1997 White Paper ‘Eliminating World Poverty’ emphasised the fundamental principles of openness, transparency and good governance for the UK aid programme. The Minister for International Development, Claire Short, has expressed her determination on many occasions that UK aid spending must genuinely and effectively contribute to poverty alleviation. If there is to be any coherence between the UK’s bilateral and multilateral aid, you should seriously investigate the issues raised by more than four hundred Indonesian civil society organisations.

In particular, we would ask you to:

                               Yours sincerely
                                               Frances Carr (Ms)

Myles Wickstead (World Bank)
Claire Short (DFID)
Margaret Cund (DFID)


Executive Directors
The World Bank
Jakarta, May 17, 1999

Dear Executive Directors,

We understand that on May 18, the Board of Directors of the World Bank plans to vote on the disbursement of a $600 million Social Safety Net Adjustment Loan (SSNAL) and a $400 million Policy Reform Sectoral Loan for the government of Indonesia. We are informed that there have been efforts to convince the Board that it should vote to approve these loans to the Government of Indonesia now, prior to the election. It has been argued that the GOI had made the right commitments to use the loans properly, as intended.

We, the signatories of this letter representing over 400 legitimate civil society organizations, strongly oppose this opinion and repeat our viewpoint that these funds should not be released before the Presidential elections. The disbursement of over $1 billion on the eve of our presidential elections will influence the outcome of this elections and will be utilized by the ruling Golkar party to ensure its hold on power. There is no technical reason why these loans cannot be postponed. The GOI has proven that it has sufficient cash reserves to arm an extraordinarily violent militia movement in East Timor, to send troops to seal off the border of West Papua, and to send troops to fire on unarmed demonstrators in Aceh. It is also necessary to note that the GOI has still not used the entire loan from IMF and the Miyazawa Plan. Instead of increasing Indonesia’s staggering debt load, which will have to be repaid by our children and grandchildren, the Bank should pressure the GOI to redirect towards poverty alleviation the tremendous amount of funds it is currently using for the repression of our civilian population. We, and many others, have unambiguously requested that the World Bank not interfere in our national elections by providing funds prior to the Presidential elections. The Bank has continued to ignore this input from civil society.

Our stand is based on the following arguments:

The Social Safety Net Program, promoted by the IMF and initiated as a result of World Bank balance of payments support, has failed to reach the right targets as a result of poor planning, corruption, poor design, poor implementation and poor monitoring. The GOI has admitted publicly that 8.6 trillion rupiah out of the total 17.9 trillion rupiah for the Social Safety Net Fund have been ‘mistargetted’ or misappropriated (Jakarta Post, April 24, 1999; Kompas, April 23 and May 5, Republika April 23 & 26 1999, Media Indonesia, May 6, 1999 and Tempo May 17, 1999), including 60% of the education scholarship funds (Kompas, May 4, 1999) and that the SSN funds have also been used to influence the outcome of our first ‘free’ national election ‘ indeed, the GOI official responsible for overseeing the SSN stated that such funds have been described as ‘Golkar aid’ (Jakarta Post, April 23, 1999).

Seven thousand of the Jakarta urban poor, one of the principal constituencies of the program, signed a petition rejecting the SSN program based on their experience that it is full of corruption, does not benefit the poor and leads to a tremendous debt burden to our country. This is supported by a demonstration on April 22, 1999, of over 2,000 of Jakarta’s urban poor calling for the halt of the program, outside the Bank-GOI SSN ‘consultation meeting’. (Suara Pembaruan, April 22, 1999).

The Bank’s OD 8.60 on Adjustment Lending states, in the first three points under the heading ‘Requirements for Adjustment Lending: Prerequisites' :

The design of a suitable adjustment program is a collaborative process, but the initiative and the leadership must come from the government. Adjustment programs require strong political commitment, and the government concerned needs to generate broad-based support if the program is to be sustainable. - The strongest influences on borrower ‘ownership’ are political stability, support (or at least lack of opposition) from the principal constituencies affected by adjustment programs, and the attitudes of government officials and technicians towards the various reforms. - Adjustment lending is not advisable when the political commitment to adjustment is weak or highly uncertain.’

Thus, the disbursement of SSNAL over such a strong opposition from one of its principal constituencies would appear to be in violation of OD 8.60

The right commitment from GOI to better administer the SSN program is in fact the agreement from the GOI side to comply with the conditionalities imposed by the World Bank for the disbursement of the remaining fund. One of the conditionalities is consultation with civil society in Indonesia. Indeed there is a process which the GOI called ‘consultation’ which took place on April 14, 15, 16 and April 22, 1999. The consultations were designed in such a way that they did not allow for a participative and inclusive process. WALHI, an organization representing 386 civil society groups throughout 24 provinces in Indonesia, INFID, an umbrella organization representing 100 civil society organizations members inside and outside Indonesia, JARI - JPS, a network representing 30 civil society organizations in Indonesia, Urban Poor Consortium, an organization comprising of 25 poor communities in the Greater Jakarta area and YLKI, a respected consumer organization consisting of 21 consumer groups all over Indonesia, all expressed the disappointment with the so-called ‘consultation’ process on April 19, 1999. In the joint statement they stated that the meetings were unproductive and unable to address the problems and produce comprehensive solutions. These groups, representing hundreds of legitimate Indonesian civil society organizations throughout the archipelago, concluded that the consultations were merely a cynical attempt on the part of GOI to appear to meet the conditionalities imposed by the World Bank.

The groups stated that:

  1. The consultations were not conducive to meaningful inputs from the participants and therefore should not be regarded as legitimizing the Social Safety Net Program. For example the agenda for the meetings was decided unitarily by the Government, there were no terms of reference to explain the framwork, process and outputs expected from the consultations;
  2. Such a consultation will not produce a comprehensive solution to the basic problems of Social Safety Net Program;
  3. A more participatory, inclusive and decentralized consultation should be carried out including meetings in the Outer Islands. (NGO Joint statement on the Consultation Held by BAPPENAS with Civil Society Groups on the Social Safety Net Program, April 19, 1999)

Both the Bank and the GOI have repeatedly demonstrated their unwillingness to incorporate the suggestions of civil society into their operations or to effectively monitor their operations. They have ignored the call from 7,000 of Jakarta’s urban poor who signed a petition rejecting the SSN program because it was, in their direct experience, plagued by corruption and did not reach the poor. They have ignored repeated written and oral requests by legitimate Indonesian umbrella organizations representing hundreds of Indonesian civil society groups calling for a halt to support and funding for SSN prior to the elections. These requests have been based on widespread and credible reports of staggering corruption -- such as the ‘misallocation’ of almost 50% of the SSN funds -- and the misuse of such funds to influence the outcome of the Indonesian elections.

In a May 10, 1999 letter to INFID, Bank Vice President Jean-Michel Severino claims that ‘nearly all of the consensus recommendations emerging from the April 14, 15, 16 and 22nd consultation meetings with NGOs and civil society were reflected in the final agreement between the World Bank and government on the SSNAL.’ He then goes on to make the contradictory statement that ‘most of the NGO and civil society recommendations were already embedded in the Bank’s loan conditions even before the consultation meetings between government and civil society.’ In the same letter, Mr. Severino also states that the GOI is ‘actively ‘selling’ [the reforms] to the public at large.’ We agree with this assessment that the GOI is, indeed, attempting to ‘sell’ the reforms to the Indonesian people. This, like Mr. Severino’s other statements, reflects our view that the contents of the conditionalities were determined -- primarily by the Bank and the GOI -- well in advance of the so-called ‘consultation meetings’ held in mid-April with civil society.

A May 7 article in Kompas, one of Indonesia’s most prominent newspapers, reports that just in the last two weeks, Indonesia’s National Planning Board (Bappenas) has received additional reports of the misuse of SSN funds by Golkar in Sumatra, Jakarta, and East Java. It quotes Herman Haeruman, Bappenas’ lead coordinator of SSN, as stating that ‘Bappenas, as a planning agency, cannot take significant action against such abuse.’ Mr. Haeruman continued, ‘This does not represent simply an abuse of funds, but it means that the SSN is used by the government apparatus as political party funds.’ As a result, citing evidence of additional abuse in Sulawesi, Nusa Tenggara Timur, and Irian Jaya, the Urban Poor Consortium has called for the disqualification of Golkar from the upcoming national elections. Indonesia’s Election Committee is now weighing whether to ban Golkar from campaigning prior to the elections. (Reuters, May 10, 1999)

We, and many others, have clearly requested that the World Bank not interfere in our national elections by providing funds prior to the elections and Presidential selection process. Such funds are and will continue to be utilized by the ruling Golkar party to ensure its hold on power. The Bank has continued to ignore this input from civil society.

Given the information on corruption and abuse of funds that has been released in the Bank’s internal documents on Indonesia during the past year, it is clear that the World Bank has a long history of being easily misled by false promises of the Indonesian bureaucracy, which to date, despite the ousting of Suharto -- has survived largely intact. Now, as in the past, promises of reform by GOI can not be accepted at face value. Bank Vice President Jean-Michel Severino states in his May 10 letter to INFID, ‘Let me assure you that no money will be disbursed until all conditions are fully met.’ We recall Mr. Severino’s equally heart-felt assurances just under two years ago that charges of significant corruption in the Bank’s Indonesia projects were ‘demonstrably untrue.’ Two years ago, Mr. Severino stated about Bank’s Indonesia loans: ‘We know exactly where our money is going. If supervision of our projects produced any evidence of misappropriation or misallocation of our funds, we would take swift action to stop it. We do not tolerate corruption in our programs. On this principle there is no compromise." Mr. Severino was wrong then. To ensure that he is not wrong now, the loan conditionalities should be, as is the norm -- met during the Loan Appraisal stage, well ahead of any Board vote. A Board vote on such loans should only occur if the conditions are truly representative of civil society input and have been met by GOI at time of Appraisal.

For these reasons, we call on the Board to:

  1. 1. Insist that the conditionalities of the SSNAL and PRSL II loans are based on proven broad civil society input, and are fulfilled prior to any Board vote on the loans. If, as the Bank believes, the GOI is firmly committed to reform, it should not be problematic for GOI to establish compliance with loan conditions prior to a Board vote.

  2. 2. Vote against the disbursement of the US$ 600 million SSNAL or the US$ 400 million PRSL II prior to the Indonesian Presidential election. Regardless of Bank claims that 'the timing of the loan is [not] driven by any considerations'about the election' (Letter to INFID, May 10, 1999), it is a fact that such funds already have been used to influence the elections and will continue to be used towards that end. It is common sense that loans provided at the time of an election to a government that has repeatedly proven itself incapable of preventing corruption will be utilized during the election process for political means, thereby influencing the outcome of the elections. This includes potentially being utilized to support anti-independence militias in East Timor.

  3. 3. Strongly pressure the Resident Mission in Indonesia to investigate the abuses of the SSN fund and PRSL I and to make their investigations public. Inquire whether the resident mission , either last year or this year, has analysed the extent of corruption in various SSN/JPS programs. Inquire whether they have analysed the impact on corruption of Bank conditionalities planned for the SSNAL. If they have assessed the ability of their conditionalities to prevent corruption or the extent of corruption in the SSN program, what were their findings?

After abuses have been publicly made known by the Bank, and recommendations made for the correction of such abuses, the Bank must investigate whether or not the recommendations have been carried out, whether the identified abuses have been corrected, whether those involved have been punished according to the law, and whether there are new abuses. This information must be made public.

We, the representatives of hundreds of legitimate Indonesian civil society organizations, call upon you, the representatives of countries voting to make loans to our government, to take the courageous steps necessary to reign in our country’s rapidly mounting and unaccounted-for debt and the abuse of funds that our people must pay back. Thank you for your attention and consideration.

The letter was signed by more than 400 organisations and 100 individuals.

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