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May 20, 1999

World Bank Delays Aid So Indonesians
Can't Use It to Buy Votes
By DAVID E. SANGER

WASHINGTON -- Top Clinton administration officials said
Wednesday that they had pressed the World Bank to make
sure that more than a billion dollars in aid to Indonesia was held up for
several weeks so that the country's government could not use it to buy
votes in the first free election there in more than 40 years.

The agency Wednesday announced that Indonesia had "voluntarily"
agreed to a freeze in use of the money until the June 7 election is held,
even though several hundred million dollars will be deposited in the next
few days in an account under Indonesia's control.

The agreement reflects the depths of Washington's fears that the ruling
Golkar party, dominated by President Suharto until his resignation a year
ago, would use the money to remain in power.

Suharto's handpicked successor, President B.J. Habibie, hopes to
retain the presidency after the parliamentary election, the first step in
a lengthy process to select a president.

Treasury Secretary Robert Rubin on Wednesday told a subcommittee
of the Senate Appropriations Committee that "Europe, the United
States and others" felt that the aid to Indonesia "ought to be held up
until after the election."

After Rubin's testimony, Treasury officials corrected his remarks, saying
that some portion of the loans -- by some accounts more than $400
million -- would be made available almost immediately. Most of that
money is to help Indonesia manage its water resources, and World Bank
officials said several safeguards would enable them to track the money
and make sure it was going to approved projects.

But the remaining $1.1 billion, about half of which was originally to have
been sent to Jakarta's accounts Tuesday, has been held up. Much of that
money is for what the World Bank calls "general budget support" to
stimulate the economy, meaning that it would go directly to the
government's main coffers.

As one U.S. official said Wednesday, "The worry is that it would end up
in little envelopes" in a country where corruption is endemic, and at a time
when Habibie's party is suffering at the polls, partly because of the
continuing disclosures of corruption and cronyism during the Suharto era.
Even without the World Bank money, much of which is to help provide a
safety net for those who lost their jobs or fell below the poverty level
during the Asian financial crisis, Jakarta has plenty of ways to lubricate
the election process with cash. It could, for example, simply print more
rupiahs, the nation's much-devalued currency, but Treasury officials say
there is no evidence it is doing so.

The delay also gives the World Bank and the Clinton administration some
breathing room to assess the outcome of the election. There are fears in
Washington that if the Habibie government tries to rig the results, violence
and political chaos could follow.

The fate of the Indonesia loans is considered particularly sensitive
because the World Bank has acknowledged that much of its aid to the

country has been misused or illegally diverted over the years. Critics of
the World Bank and the International Monetary Fund have pointed to
those diversions to press their argument that the United States should not
be using taxpayer dollars, even indirectly, for such programs.






History often repeats twice, the first time occurs as a tragedy,
the second time a farce.

                                                            Karl Marx

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