(Fwd) World Bank rates its Indon performance as 'marginal'

[Robert Weissman <rob@essential.org>]

*World Bank rates its Indonesia performance as 'marginal'

JAKARTA, Feb 10 (AFP) - In a highly critical self-assessment the World Bank
has admitted it may have overlooked warning signs as the "Indonesian miracle"
faded because of a desire not to upset Jakarta.

In a confidential document, the bank reveals that corruption in Indonesia was
often glossed over and that self-seeking staff mixed strongly worded policy
notes with praise for the government.

The World Bank rated its performance in Indonesia as only "marginally
satisfactory," not just during the current economic crisis but for much of the
past 30 years.

The report demanded to know why the "myth of the Indonesian miracle" was still
alive in July 1997 when Asian economies went into a tailspin and why the bank
was so unprepared for the crisis.

"Perhaps the bank tried to preserve the image of the Indonesian miracle for
too long. Perhaps the bank was too concerned with maintaining good relations
with one of its best clients," the internal evaluation suggests.

The 40-page inquiry report, a copy of which has been obtained by AFP, says
Indonesia "was widely perceived within the bank to be a miracle and a symbol
of the bank's success.

There was little incentive "to take a close look at Indonesia's development
model" because for many bank staff association with a "successful" large
country was beneficial to their career.

"Serious structural problems which were well known to the bank persisted (in
Indonesia)," the report says, referring in particular to the major issues of
governance and corruption.

"Corruption has been and continues to be a problem in Indonesia," it says.

"With a large and well established mission in Jakarta, bank staff were aware
of the country risk. The mission had easy access to senior officials who
frequently prepared confidential policy notes.

"(But) bank management was ambiguous in its messages to the Indonesian
government. Strongly worded policy notes on major structural issues were mixed
with constant and vocal praise for the government's performance, and
significantly contributed to complacency."

Dennis de Tray, the head of the World Bank in Indonesia for the past five
years, refused to comment on the substance of the document when questioned by
AFP. But he said a first draft was "downgraded after being submitted to the
Indonesian government."

While the report denounces staff performance in Jakarta, it does not pinpoint
higher responsibility for the lack of supervision despite the fact that more
than 25 billion dollars was committed over some 30 years to a country often
rated as one of the most corrupt in the world.

The report simply makes mention of "an unfortunate combination of staff
turnover, some of it due to policy disagreements and the 1997 reorganization".

A key question posed by the document, according to a Jakarta-based Western
economist, is what credibility can now be put on analyses provided by
international financial institutions, particularly the World Bank.

"The Asian economic crisis has shown that the World Bank and the International
Monetary Fund (IMF) systematically wear rose-coloured glasses," the economist
said.

"The lessons of the Asian crisis do not always seem to have been understood,
in any case not in Indonesia. These financial bodies will be stuck from now on
to justify retaining the handling of grants." 

The economist cited a paper presented last month to a Bangkok conference on
the Asian crisis in which the IMF gave a preliminary assessment of its
programs in Indonesia, Korea and Thailand.

"The Fund and the authorities appear to have erred on the side of optimism in
part because of concerns that realistically pessimistic forecasts would have
exacerbated the situation further," the paper said.

As the value of Indonesia's rupiah collapsed against the dollar, the IMF
arranged 46 billion dollars in aid for Indonesia and the World Bank organised
a one-billion dollar loan package.

But the disbursement of funds was often delayed as Jakarta hedged on wide-
ranging economic reforms demanded by the donors.