Wolfowitz's Tenure in Indonesia Eyed

The Associated Press
Friday, May 4, 2007; 5:29 AM

-- JAKARTA, Indonesia _ The controversy surrounding World Bank President Paul Wolfowitz spotlights a lack of ethics that was apparent two decades ago when he was U.S. ambassador to Indonesia, say critics who recall how he failed to speak out against corruption and rights abuses.

Today, as head of the bank, Wolfowitz has been arguing that corruption is crippling the world's poorest nations. But that was "the very thing he closed his eyes to" when he served as ambassador from 1986 to 1989 during the regime of the dictator Suharto, said pro-democracy activist Binny Buchori.

"He's a hypocrite," she said. "He should quit."

Wolfowitz is fighting for his job after disclosing that he helped arrange a promotion and raises for his girlfriend Shaha Riza soon after taking over the bank's helm in 2005. Wolfowitz says he is the victim of a smear campaign and has refused to resign.

But Jeffrey Winters, a professor of political economy at Northwestern University, said that Wolfowitz's past career already showed he was ill fit to run the World Bank.

"From the very beginning, I felt this was the wrong person for the job," said Winters.

He pointed to the radical deregulation of Indonesia's banking sector in 1988, promoted by Wolfowitz's economic team and international lenders. It "opened the floodgates for local crony conglomerates to set up private banks and take in deposits from a trusting public."

With no rule of law, there was no oversight and no supervision, he said.

"The foxes were running wild in the financial chicken coop and no one, including Wolfowitz, pressured the Indonesians to design safeguards to protect the public's deposits," he said. One result was the 1997-98 financial crisis "that plunged tens of millions into abject poverty."

Suharto, who ruled for 32 years, was toppled in 1998 by pro-democracy demonstrations.

The former dictator's family has been accused of embezzling an estimated $35 billion in state funds during his regime, according to corruption watchdog Transparency International. Hundreds of thousands of people were killed under the dictator's brutal reign.

Supporters say Wolfowitz pushed quietly for economic and political reforms. One example: a call for greater openness at his farewell speech at Jakarta's American Cultural Club in 1988.

CONTINUED     1        >

© 2007 The Associated Press