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'Antigraft strategy offers high rate of return'
The Jakarta Post , Jakarta | Thu, 09/21/2006 9:09 AM | Opinion
During its annual meetings in Singapore, the World Bank is bolstering its governance and anticorruption strategy as an integral part of its work to reduce poverty and promote growth. World Bank country director for Indonesia Andrew Steer talked to The Jakarta Post's Riyadi Suparno on the bank's strategy.
Question: How will your anticorruption strategy affect your operation at the country level?
Answer: In Indonesia, we are very well positioned to take this forward because, first, the government is very committed at a very high level, and it is developing a very clear strategy of what it wants to do. So, this is very much a government-led thing, so, it's absolutely not the World Bank or anyone else pushing anything. And the second reason is that we already have probably the largest governance team in the world in any office sitting in Jakarta.
What about at the project level?
We already, more than any other country office in the world, have in place a mechanism to address, to prevent corruption in our projects. We have a full-time team in the Jakarta office dedicated to anticorruption. That means designing smarter projects.
For example, traditionally every project that has a major procurement would prequalify bidders. So, if you want to build a big road, you don't want just anybody to bid, you pre-qualify the bidders. That list of bidders might have five or six companies on it and become known. Once a bidder knows who else is prequalified, it makes it a lot easier for them to collude. So, we have requested that the government abolish prequalification, and that means you can have a dark horse coming to bid at the last moment to undercut them, and that's what we want.
Under normal circumstances, prequalification is a good thing to do. You don't want to waste a lot of time having a lot of unqualified bidders coming. But in this case, when you think about corruption, you actually want to post-qualify the bidders rather than prequalify them. This is just one of many examples of how we are trying to design smarter projects.
Finance Minister Sri Mulyani Indrawati has raised her concern over a possible increase in transaction costs as a result of incorporating the anticorruption strategy into projects. What's your argument to pursue anticorruption at the project level?
You have to watch that. I mean it's potentially a problem if you gold-plate everything, you can add to the cost of the project. But if you've got a US$200 million project and if you put 0.5 percent, that would be $1 million, and that's a lot of money. With $1 million, you can do the best anticorruption in the world. And 0.5 percent is not very much. And one thing we can say with absolute certainty is that if you took 0.5 percent, you can save much, much more, many times over.
Recently you wrote a letter to the finance minister, demanding refunds for your loans and grants for projects where you have found corruption. You also threatened to cancel another loan. Where does the responsibility of the bank lie?
We didn't cancel any loan or any project. The project is going ahead, and this was the design of road projects. That was a group of sophisticated engineers, doing engineering designs for these strategic road projects that we are now financing. So, the work is done, it's actually done well, as a result of their good work, we are then providing another $208 million to support the actual building or improvement of the roads. So, nothing was canceled.
What happened was that during the implementation of the contract, the design of the roads, kickbacks were paid by the consultants to the government officials, and in that circumstance, the World Bank is obliged to declare what we call misprocurement. And that's what we did, and the letter was leaked, not by us.
We are very keen to make a point that this is not a punitive thing. We are not saying, you sinner, you can't stop the corruption, and we are canceling the project. That's not the tone at all.
Minister Sri Mulyani also expressed her worry about the possible different criteria in defining corruption between the government and the World Bank. Your comment?
I believe that everything we call corruption, the law in Indonesia calls corruption. When a government official receives payment from a company, two crimes are committed: The company is committing a crime, and the government official who receives the payment is also committing a crime. That's not American law or British law, but it's Indonesian law.
What actually happens is some officials really believe that it is not wrong, and they believe that the salary of public officials is so low and that it's entirely appropriate.
If that is the case, then they should change the law and decriminalize it.
Don't you think that the low salary of civil servants would hamper the country's efforts to root out corruption?
What's absolutely certain is that it would not be possible to make a dramatic improvement in corruption unless the way in which civil servants are paid is changed. It doesn't necessarily mean that everybody has a big increase in salary, but it also may mean that. But it does mean that the way in which salaries are paid, where you have what you call a salary, and a lot of allowances, that needs to be changed, because it is very confusing and opaque.
The Finance Ministry is now undergoing a major review of that compensation system. That would enable them to have a much more rational way of allocating compensation. That in turn would make it easier to put the anticorruption measures in place.
There are concerns that your anticorruption strategy could eventually penalize the poor. How would you ensure that your anticorruption measures will not punish the poor?
So, if you do the corruption strategy wrong, it would hurt the poor. If you do the anticorruption strategy right, it would help the poor.
The best example would be the government's village-level development programs, which they announced two weeks ago, covering 75,000 villages. That would be the biggest community development in the world to be done. In many countries, that would be just money to be corrupted away. In Indonesia, because it is built upon two very, very good projects that have focused on anticorruption -- the Kecamatan Development Projects (KDP) and the Urban Poverty Program (UPP) -- this program will be a huge success.
It's a brilliant initiative by the government. Because of those KDP and UPP, a lot of corruption cases have been found, villagers pointed them out, and a lot of subdistrict and village heads are now in prison, essentially because of these programs.
