IMF, World Bank Helped Fund Militias in East Timor

by Abid Aslam

The failure of Indonesian security forces to check anti- independence militias from rampaging against voters suspected of supporting an end to rule by Indonesia has unsettled the international financial institutions and governments providing loans and grants to Jakarta.

The big question is: Has their money been used to bankroll oppression and violence, and what are they willing to do about it?

Escalating violence, however, has prompted the UN Security Council in New York and the U.S. government to renew demands that Indonesia curb the militias activities. New Zealand is calling for an international military force to maintain order.

Indonesia repeatedly has insisted it is in control and has rejected calls for armed international peacekeepers but State Secretary Muladi has been quoted as saying that the option of a UN force is now "an alternative that has to be considered."

Human rights and development organizations, however, say that the international community also must follow its money more closely to root out all sources of the troubles in East Timor.

Donors and lenders -- especially the World Bank and International Monetary Fund (IMF), chief engineers and enforcers of Indonesia's international bailout -- "need to take some moral responsibility," says Lynn Fredricksson, Washington representative of the East Timor Action Network.

Groups such as Fredricksson's for months have been lobbying the World Bank to suspend its East Timor operations and to launch a comprehensive financial audit in light of evidence that foreign aid funds have been misdirected by local authorities to bolster anti-independence forces.

That concern was boosted in June, when UN Secretary-General Kofi Annan reported "strong indications that public funds have been used" by local officials to support pro-autonomy campaigns -- in violation of international peace agreements signed in early May.

The evidence includes leaked budget documents purportedly showing that East Timor Governor Abilio Jose Osario Soares tried to divert more than $700,000 in World Bank-mandated 'social safety net' funds -- earmarked for rice distribution, health care and education -- to the pro-autonomy cause.

The money was to be used for "civil defense corps" in the districts of Lautem and Ambeno as well as "socialization programs" -- a euphemism for anti-independence campaigning.

Soares has declined to comment publicly about the documents but Bank sources say he has not denied the budget's authenticity in response to their questions.

Bank officials say their own and Indonesian government inquiries conclude that the lending agency's funds have not been involved. "There has been no evidence presented to date linking our money to the militias, just allegations," says Bank spokesman Peter Stephens.

The Bank's probe "doesn't delve into details and relies too heavily on Indonesian self-investigation," Fredricksson counters.

The enquiry overlooks evidence, collected by the Bank's own staff, that local forces have controlled the distribution of social funds and donated rice, using these as leverage over the local population, she contends.

"Whether or not World Bank or donor money was used directly to support paramilitaries is almost irrelevant," she adds. "The point is, at the very least, it frees up other money for oppression and should be suspended until the paramilitaries are disarmed and disbanded."

Such a move may not be in the cards. Whatever the outcome of Monday's voting, the Bank is "ready to move in East Timor," says Jean Michel Severino, the agency's vice president for East Asia and the Pacific.

The size and details of a direct lending program have yet to be worked out but "we feel ready to help," he says.

Corruption has haunted the Bank's Indonesia program and it acknowledges that one-fifth of its financing routinely has been siphoned off -- sometimes with staff members' knowledge and possible collusion.

The lender now conditions disbursements on closer supervision and streamlined procedures aimed at ensuring that aid "does not pass through too many hands," according to Stephens, but potential abuses remain a concern.

Meanwhile, "the questions raised over East Timor apply far beyond it," says Fredricksson, since the Jakarta government also is fighting what it sees as challenges to its sovereignty in Aceh, West Papua (or Irian Jaya), and the Moluccas.

For that reason, political analysts argue, the international community itself is reluctant to intervene forcefully or impose sweeping sanctions, fearful that such steps would contribute to the break-up of an already unstable Indonesia, the world's fourth most populous country and a long-time US ally.

Indonesia's donors in July committed 5.9 billion dollars through next March despite concerns over graft, security and political uncertainty.

Thus the international response has been limited to "huffing and puffing," says Michael van Langenberg, head of Southeast Asian studies at Sydney University in Australia.

"The World Bank can come and wave the financial stick a little bit but I guess everyone in Jakarta knows there's a limit to which financial sanctions can be imposed, because that would encourage the political break-up of Indonesia," he argues.