[Kabar-indonesia] WB cancels two infrastructure projects on graft allegations

[Joyo at aol.com]

The Jakarta Post
Saturday, August 12, 2006

WB cancels two infrastructure projects on graft allegations

The Jakarta Post, Jakarta

The World Bank has canceled two loan contracts for the Eastern Indonesia 
Region Transport Project (EIRTP) and another for the Strategic Roads 
Infrastructure Project (SRIP) due to alleged corruption involving the projects' consultants 
and government officials.

In a letter addressed to Finance Minister Sri Mulyani, the WB said that the 
decision had been made following an extensive investigation into suspected 
bribery in the hiring of a firm of consultants for the implementation of the two 
projects.

"The bank has found evidence supporting allegations of bribes and the making 
of other illicit payments in respect of three consulting contracts entered 
into by the Indonesian government, through its Ministry of Public Works, with WSP 
International Ltd, two of which were financed under the EIRTP Loan Agreement 
and one under the PHRD grant agreement and PPA facilities," the letter said.

Accordingly, the letter continued, the WB had canceled two undisbursed loans 
totaling US$1.09 million under the EIRTP Loan Agreement and another 
undisbursed loan worth $501,332.43 under the PPA facilities -- which comprise loan 
agreements on a project preparation advance for the preparation of SRIP and a 
supplemental advance for the preparation of SRIP.

"It is the policy of WB to cancel those portions of the EIRTP Loan, PHRD 
Grant and PPA Facilities allocated to contracts which have been misprocured or 
which WB has determined were affected by corrupt practices," said the letter.

The Indonesian government signed the EIRTP Loan Agreement with the WB on Jan. 
22, 2002, the PHRD Agreement to administer Japanese-provided grant funds on 
Oct. 21, 2003, and the PPA Facilities Agreement on June 11, 2004.

The WB has now requested the government to refund $2.03 million, which has 
already been disbursed under these contracts.

The WB has also requested the refunding of the US$1.12 million and $1.54 
million that were disbursed under the PHRD Grant Agreement and PPA Facilities 
respectively.

"Accordingly ... the three contracts with WSP, which totaled Rp 38.54 
billion, $525,570 and œ859,193, were not eligible for financing under the EIRTP Loan 
Agreement, the PHRD Grant Agreement and PPA Facilities, respectively," said 
the letter.

It said the WB's Department of Institutional Integrity (INT) received 
allegations from a contractor that WSP had paid bribes to government employees in 
connection with the award of a contract for the preparation of the SRIP and two 
contracts awarded during the course of the implementation of the EIRTP.

WB investigators ascertained that WSP paid a total of $356,703 in connection 
with the three contracts to persons identified as government officials, the 
letter said.

It continued by saying that the payments to the officials were, according to 
the accounts audited by INT, always in cash and disguised through false 
entries and fabricated documentation.

Although not able to identify the exact individuals involved on the 
government side, the letter said that investigators found that corrupt payments 
amounting to between 1 and 4 percent of the professional remuneration fees under the 
contract were paid shortly after the contract award; further sums amounting to 
between 5 and 10 percent of the professional remuneration fees were paid when 
payment invoices were submitted by the consultant; and other payments were 
made on a variety of occasions, such as special events and holidays.

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Joyo Indonesia News Service
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