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Corruption

Publicly Guaranteed Corruption
Corrupt Power Projects and the Responsibility of Export Credit Agencies in Indonesia

The Background of Corruption in Indonesia

In particular during the regime of General Suharto, Indonesia had a reputation of being a highly corrupt country. In 1997 – the last year the dictator was in power – the island nation was number 46 out of 52 countries on the corruption list of Transparency International – by no means a flat­tering position. In the end of 1995, the then Swiss ambassador Peter Hollenweger accused In­donesia of „enormous corruption, legal uncertainty and bureaucratic arbitrariness". Daniel Zu­berbühler, Director of the Swiss Federal Banking Commission, described President Suharto in May 1998 as "highly corrupt". In Indonesia, the phenomenon of corruption, collusion and nepo­tism is known as KKN ("korupsi, kolusi, nepotisme").

In August 1998, an internal working group of the World Bank prepared a confidential survey on the extent and the mechanism of corruption in Indonesia. The Berne Declaration published the document in 1998 under the title "7 Milliarden Dollar für die Korruption?". In their survey, the Bank’s working group provided an in-depth account of all the positions to be bribed during the various stages of a project, including the amount of the relevant bribes expressed as a percent­age of the project budget. It is also and in particular the foreign suppliers that are involved in this process. The working group concluded that a minimum of 20 to 30 percent of the Indonesian development budget are misappropriated. This amount largely corresponds to the estimates by other experts, such as the US-American professor Jeffrey Winters or former Indonesian Finance Minister Sumitro Djodjohadikusomo. Both estimate the misappropriated share to range between 30 percent and one third of the project budgets.

Internationally as well as in Indonesia, the power industry has a reputation of being particularly prone to corruption. In June 1998, as a prerequisite for an agreement with Indonesia, the Inter­national Monetary Fund demanded that an audit according to international standards be con­ducted in the electricity board PLN. In summer 1999, a gigantic corruption scandal at the Leso­tho Highlands Water Project, a dam project of the World Bank in southern Africa, became public. A great number of large power plant companies worldwide were involved, among them ABB, Acres International, Balfour Beatty, Impregilo and Spie Batignolles. In Germany, Italy, Denmark, India and Malaysia, action was brought against ABB because of further cases of bribery and illegal cartel agreements.

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