Lisa Peryman
Odious Debts Online
January 14, 2005

As world governments prepare to channel hundreds of millions of aid dollars to the tsunami-devastated coastal regions of Indonesia’s northern Aceh province, Indonesia’s culture of corruption has emerged as a major concern.

In today’s edition of The New York Times, renowned investigative journalist Raymond Bonner claims that corruption in Indonesia starts at the top. Earlier this month, chemical giant Monsanto Co. admitted to paying a bribe of $50,000 to a senior official in Indonesia’s Ministry of the Environment in exchange for dropping a requirement for an environmental impact statement, notes Bonner. The company was fined $1 million by the US Department of Justice.

“That a public official had been bribed by a foreign company surprises few here, if any,” writes Bonner. “It is taken for granted that no one does business in Indonesia without paying bribes, routinely disguised as ‘consultants’ fees,’ to government ministers and heads of agencies, many of whom have retired with hundreds of thousands of dollars stashed in accounts in Singapore and elsewhere.”

While countries sending funds to Indonesia are right to be concerned about the exploitation of relief, it is not only Indonesians that may be tempted.

The perception of endemic corruption in the developing world Bonner describes is a view widely held in the North, but it is one that fails to recognize the role foreign governments and corporations often play in the problem. The example of Lesotho in southern Africa, which is prosecuting multinational companies that paid bribes to win lucrative foreign-aid contracts in that country’s Highlands Water Project, is a case in point.

In an interview with Engineering News in 2003, Dr Daryl Balia, the chair-person of graft watchdog Transparency International (TI) in South Africa, said the Lesotho cases show that much of the corruption which takes place in Africa is often initiated by multinationals.

“There is a tendency to infer that Africa is inherently corrupt, but what we have on the continent is petty corruption, while grand-scale corruption is, to a large extent, driven by big corporations from the developed world.

“After all, it takes two to tango, and there is no basis for the assertion that Africans are corrupt,” said Balia.

The international community, often quick to demand Third World governments clean up their act, are less quick to follow through with action.

The landmark Lesotho trials are still ongoing and although Lesotho has impressed the world with its determination to hold wrong-doers to account, Lesotho’s judiciary met with contempt from some Northern countries when Lesotho prosecutors began indicting and then convicting engineering firms – some of the most venerable in the business – from those countries.

After being convicted for bribing an official in relation to the project in 2002, the Canadian engineering firm Acres International was quick to challenge the authority of the Lesotho High Court.

“No judge in Lesotho has ever heard a trial of this sort or of this magnitude,” said Acres spokesman at the time, George Soteroff, comparing the expertise of the Lesotho’s High Court to that of a magistrate’s court elsewhere.

When the high court ruled that the “representative agreement” between Acres and a project official Acres was convicted of bribing was a ploy to hide bribes, Soteroff dismissed the agreement as a type widely used by engineering companies and other firms internationally “which the court apparently does not recognize or understand.”

For its part, the Canadian government – whose honorary Consul in Lesotho was the Acres’ agent who paid the bribes – defended Acres’ access to future publicly funded projects from the World Bank and other agencies on the grounds that Third World court decisions could not be trusted because they were known to be corrupt.

While there is no doubt corruption runs rampant in some parts of the world, as in Indonesia, concerns over disaster aid should not be limited to corrupt officials in tsunami-hit regions. As top judges in Lesotho discovered, graft is indeed a two-way street and its destructive impact is felt the most in developing societies where poverty is wide-spread. To stop it, Northern governments and international aid agencies have to get serious about blacklisting any company that engages in corruption.

The nongovernmental agency Indonesia Corruption Watch, which Indonesia’s President Susilo Bambang Yudhoyono has entrusted to monitor incoming disaster aid, has said it did not expect problems to surface immediately in the emergency relief phase. It predicts opportunities for “serious theft” will come in the rehabilitation and reconstruction phase, estimated at $3 billion: a serious temptation, noted earlier by Bonner, “in a country where there are no conflict-of-interest laws and government officials have long seen public office as a vehicle for private gain.”

Calling for strict measures to prevent the exploitation of tsunami disaster aid, President Yudhoyono has warned Indonesians that those “who have something in their minds in terms of their usual practices” will be severely punished. Bearing the example of Lesotho in mind, international companies and Nothern governments that participate in the reconstruction effort would do well to review their own “usual practices” in graft-plagued southern countries also.