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Subject: World Bank in Indonesia
Date: Fri, 17 Jul 1998 00:49:25 -0700
From: Max White <maxw@rain.com>
"Caught up in enthusiasm"
On Tuesday, July 14, The Wall Street Journal published a devastating article about the World Bank in Indonesia. The article ("Speak No Evil: Why the World Bank Failed to Anticipate Indonesia’s Deep Crisis") describes how for decades the World Bank has manipulated economic reports to please and placate Suharto and his family, and to entice foreign capital to Indonesia. A major factor precipitating the collapse of Indonesia's economy was, "When the economy got dicey last year, this capital fled, undermining Indonesia’s currency.
Earlier this year, as Indonesia’s economy was diving, James Wolfensohn, the bank’s president, admitted that the World Bank was caught flat-footed by the dramatic failure of the Indonesian economy. In the WSJ article, he states coyly that "We were caught up in the enthusiasm of Indonesia." What he didn’t reveal at the time, but the article makes clear, is that the World Bank was "caught up" in more than enthusiasm. For example, government officials were allowed to soften reports critical of corruption: "The soft approach was demanded by government officials who, under World Bank practice, got to alter reports before publication."
One conultant, Mari Pangestu, points out that corruption was never mentioned until 1997; and describes her reports being "sanitized… I’ve written reports where, when I’ve gotten it back, I hardly recognized it."
The World Bank was complicit in deceiving foreign banks and investors, and in hiding the $Billions loaned to Suharto family members and never repaid. "Until the 1980’s, Indonesia’s financial system was dominated by seven state banks that often channeled money to projects involving Suharto kin or friends. Those loans seldom were repaid."
A telling incident concerns WB lies about the level of Indonesian poverty. "Jeffery Winters, a Northwestern University professor who was a U.S. Agency for International Development consultant in Jakarta in 1989 recalls an incident he says shows that Indonesia poverty numbers were ‘pulled completely out of thin air.’ He recalls President Suharto insisting in public that poverty had dropped to 30 million, even though the World Bank was in the middle of a three-year study that showed 60 million poor. He says AID officials tried to forge a compromise between the World Bank and the Indonesian government. In the end, the bank report put the number at 30 million."
Some might view this as "caught up in enthusiasm;" others as "cooking the books."
(Thanks to Jeff Ballinger of Press for Change for bringing the article to our attention.)