•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   
•    EYEWITNESS   

The World Bank has advised Indonesia that it must improve its corporate governance if it wishes to win the hearts of foreign investors.

“When foreign investors see unethical behavior and corruption, they appreciate it when there’s an immediate and clear response,’’ said Shubham Chaudhuri, the World Bank’s lead economist in Jakarta.

The comments were made after the Washington-based body, which has been a major financier of the country’s economic development, released its quarterly report on Indonesia, in which it reaffirmed its growth forecast.

Asked about the investigation into the latest scandal, in which a senior Bank Indonesia figure was revealed to have taken a loan from a Bank Century official just before a government bailout, Chaudhuri said: “I don’t know the details, but I think it’s a matter for investors whether it’s a transparent and honest effort to fight corruption or whether it’s politically motivated.’’

Bank Indonesia Deputy Governor Budi Mulya borrowed Rp 1 billion ($112,000) from the then co-owner of Bank Century, Robert Tantular, in August 2008. Budi, who was appointed to the role in November 2007, took the loan just three months before the government moved in to recapitalize the lender. The state, which initially spent about Rp 600 billion, ended up with a final cost of Rp 6.7 trillion.

Bank Indonesia spokesman Difi A. Johansyah was quoted by Antara news agency as saying the central bank’s board of governors decided in a Sept. 19 meeting that Budi had breached ethical standards when he took the loan.

He was stripped of his role in managing monetary and foreign exchange policy and instead tasked with overseeing administration of special facilities such as the central bank’s museum.

Chris Wren, the executive director of British Chamber of Commerce in Indonesia, said improving corporate governance should be the main concern for the central bank.

“BI has consistently been progressive in matters of governance, and we would expect them to remain committed in that regard,’’ Wren told the Jakarta Globe.

James Filgo, a 30-year Indonesian resident and senior figure in the American Chamber of Commerce in Indonesia, said that while political and corruption scandals were a concern, foreign investors were more worried about problematic government regulations that restrict foreign participation in the domestic market and infrastructure development.

Several senior Bank Indonesia officials, including former governors, have been convicted or are suspected of involvement in corruption cases, including bribery of lawmakers and mismanagement of funds.