Select Committee on International Development Appendices to the Minutes of Evidence



  Confidential:WB Indon Resident Staff Views re "Leakage", Staf Bank Dunia di Jakarta Augustus, 1997


   (Emphasis Added)

  (The following summarises informal discussions with RSI operations staff, confidential inputs from a small number of contractors and consultants, and the views of the RSI Working Team of experienced project officers; this does not presume to represent the results of a rigorous analysis, rather it is an operational overview of the problem.)

  Any review of the problems of budget "leakage" from Bank projects must begin with two unequivocal statements of fact:

  1.  Documentation of procurement, implementation, disbursement and audits for Bank-financed projects are generally complete and conform to all Bank requirements; we have moved aggressively to resolve each and every irregularity for which we have documents (as well as many cases of preventive action and informal corrections of problems).

  2.  Bank staff members have not been implicated in any form of misconduct; the Bank, is widely regarded as one of the few "uncorruptable" institutions in the Indonesian development process, but many of our staff (particularly HQ TMs) are viewed as ignorant or uncaring (as in "they don't really want to know") of local practices and thus subject to being misled or deceived rather easily. However, even with these facts established, our projects are being implemented in an administrative culture which is not just tolerant of collusion and diversion of funds, but which blatantly expects civil servants to supplement their incomes by such means; Bank projects are not immune to these practices. One of the difficulties in attempting an analysis of the nature and magnitude of such diversions is the wide range of variation in operational methods among GOI organizations. As described in the accompanying note on "Typology of Informal Payments in GOI Development Projects" (perhaps to be retitled: "A Guide to GOI Worst Practice" ), there are a variety of techniques commonly used, but with very different amounts and percentage diversions, by the project officers of GOI agencies. In aggregrate we estimate that at least 20-30 per cent of GOI development budget funds are diverted through informal payments to GOI staff and politicians, and there is no basis to claim a smaller "leakage" for Bank projects as our controls have little practical effect on the methods generally used.


  To establish appropriate cultural context for the description of GOI practices, two fundamental facts of Javanese life must be understood: (1) the Javanese social order is extraordinarily hierarchical, requiring respect and deference to those holding higher positions; and, (2) dating from the colonial era, civil servants are paid in two separate components, a base salary and allowances (usually rice, transport, etc) package, which is only minimally sufficient to cover subsistence requirements, is paid to each employee for simply reporting for duty; any significant task assigned is expected to be renumerated with a separate honorarium or project bonus, which officially is to be budgeted as administrative overhead in each project budget request, but this is not regularly provided, leaving nearly all civil servants in constant search of supplemental income. A common slang expression classifies civil services positions as being "wet" or "dry" depending on the relative accessability of supplemental income. Those assigned to "dry" positions frequently spend most of their days in other forms of employment of all types (eg an engineer might "moonlight" for a private developer, an office boy may work as a private courier, etc). These practices represent a significant loss to GOI in terms of administrative capacity and efficiency, but are not classified as "leakage" per se.

  It must also be understood that the GOI officials occupying "wet" positions, ie responsible for administration of development projects or in other positions of significant responsibility, are faced with expectations of income assistance from both higher and lower officials within their work unit. The distribution of diverted funds thus becomes a quite elaborate system in many agencies. Unlike corrupt practices in many other developing counties, the GOI system still expects an acceptable project outcome/result and peer pressures and scrutiny by others in the system tend to limit incomes. (Particularly in recent years, the same cannot be said of higher levels of the structure, and there are serious concerns about the recent erosion of the expectations of quality results.) Another variable in the system is the fact that some GOI officials have been expected to pay for their appointments to "wet" positions (this is frequently reported to be the case in provincial and local governments; eg the price of appointment as Mayor of a major city is said to range from Rp 1-5 billion), thus some of the diversion must be regarded as a form of cost recovery! The demands of the ruling political faction GOLKAR on their core membership of civil servants in "wet" positions has frequently been cited as a key determinant of leakage, especially during the past two years ahead of the May 1997 elections. Of course, there is an element of simple greed in all parts of the system as well, but it is extremely difficult to determine if a seemingly greedy demand by a senior official is inappropriate or simply a pass-through demand from an even higher level. It is clear that the accumulation of such demands weighs most heavily on projects executed at local government level, where GOI controls are weakest and staff are least willing to question instructions of superiors.

  On a more positive note, in those implementing agencies where professional competence and compensation have been improved substantially, and where adequate project management expenses have been brought on budget, the demands for diversion of funds seem to have been quite significantly reduced (eg PLN, Telecoms, PGN, and our Health project offices wherein the Bank is financing salary top-ups and other expenses). The primary distortion in these agencies appears to center on firms owned or controlled by senior government officers or their family members seeking to subvert the established procurement processes for major contracts. Of course, it must also be noted that in such large-budget operations ( MPW, PLN and Telecoms particularly) even relatively small percentage diversions can total huge sums, but we see no clear pattern of diversion.

  While we regard the accompanying "typology" paper as broadly indicative of the patterns and magnitudes of institutionalized diversions of the GOI development budget, the Working Group wishes to illustrate with the foregoing paragraphs the complexity and variability in the patterns of diversion which have to date frustrated any attempt to more precisely quantify or analyse the problem. There are significantly diverging opinions regarding the potential value of attempting to conduct "representive" sampling of projects or contracts, with some members strongly supportive and others feeling it would provide little more than an expanded group of anecdotal cases, but all recognize the difficulty of defining a truly representative subset within the Bank's portfolio. We would welcome the opportunity to discuss this further with you. In addition to the typology/summary, we are also forwarding notes from our Working Team members with the request that they be "for your eyes only". Your request for some examples of Bank projects impacted by these practices is partially fulfilled by these papers; I will prepare a more concise note summarizing the examples if you wish. We will also revise the previous draft note regarding recommended improvements to our procurement processes, and supplement this with other recommended actions to be undertaken by the Bank in cooperation with GOI. The Team would also like the opportunity to meet with you at your earliest convenience to discuss your reaction to this material, next steps and/or additional material you wish us to generate.


Process/Problem Description

  All GOI agency budgets are prepared in two parts: (i) routine costs of personnel base, office operations, etc. and (ii) development projects budget including implementation overheads for project design, supervision, etc. However, from the earliest days of the New Order government to the present, the budgets contain only subsistence-level wages for civil servants and grossly inadequate operations and implementation overheads to allow public announcement of inflated figure for development projects investment.

  The compensation system for civil servants predates GOI, having been established during the colonial period. Each public employee is paid a subsistence package of base salary plus allowances (typically rice, transport, etc) from the routine budget, in what may be characterized as a "retainer" for reporting to his/her duty station, then task honoraria or position allowances are to be paid to compensate each employee for work actually performed. The GOI administrative tradition of under-budgeting and/or diverting funds for these supplemental compensation payments leaves essentially all six million civil servants being officially compensated at subsistence level only, with the clear expectation that they will find or create means for supplementing their income. In popular slang, GOI agency positions are classified as "wet" or "dry" based on the relative accessibility of additional income. However, it is a common expectation that persons assigned to "dry" positions will supplement their income (with part-time employment or other activities). The GOI budget process thus assumes the continuation of funds diversion practices.

  Most GOI agencies have sophisticated informal systems for diversion of 10-20 per cent of the development budget under their management and for utilizing the proceeds diverted to supplement both their inadequate operations funds and their compensation. These arrangements vary widely among GOI agencies, but almost universally depend on the payment of percentage or lump-sum rebates or "kick-backs" by contractors implementing projects from the agency development budget. Such payments are informal but regarded as an overhead or informal "tax" by most firms doing business with GOI, and are typically included in the unit prices or inflated bills of quantity for the contract. Most GOI agencies demand that quality of project outputs be maintained, although there is concern that attention to quality is being eroded by increasing greed of some managers. The percentage diverted by local government agencies is typically somewhat higher due to generally smaller contract size, as well as additional demand for sharing the proceeds (eg often the local military command and/or provincial officials will seek shares). It is difficult to classify this widespread practice as "corruption" in the normal meaning of the word, and there is an important distinction to be drawn between this established process and those cases of embezzlement, fraud, collusion and misappropriation for personal enrichment which constitute actions more typically defined as "corruption". It is suggested that for discussion purposes the budget manipulations be referenced as "systemic diversions", while the non-systemic cases be termed "project diversions" or "criminal activity"; clearly, both types of diversions must be addressed, but differently.


  (This listing is indicative only, as all parties contributing to this summary have stressed the wide variation in types and amounts for individual projects and implementing units.)

  Pre-Project Expenses (5-10 per cent or more of project budget):

    —  Payment by project sponsor to BAPPENAS for budget allocation (3-5 per cent or more? Local government project agencies must also pay local and provincial BAPPEDA similar percentage).

    —  For donor-assisted projects, payment by project sponsor to BAPPENAS for Blue Book listing (1-2 per cent for listing, more if donor commits financing)

    —  Payment by project sponsor to MoF for budget (DIP) release; local governments pay @ for release of INPRES, SPABP,etc. and MoF for subsidiary loans (1-2 per cent or more?) Land Aquisition and Resettlement Costs (extremely variable, but generally "wet"

    —  Numerous reports of diversion of 50-80 per cent of funds budgeted for project land aquisition and resettlement assistance, either by production of falsified documents showing higher amounts than actually paid or by use of "middlemen" to aquire land at a low price for resale to GOI at inflated values. Local governments agree undertake much of the land aquisition for central agency projects, only because of the potential for diversion.

  Contract Procurement and Award Process (extremely variable, 5-35 per cent. see below):

    —  All contractors, suppliers and consultants pay sponsoring agency to be pre-qualified, then pay for place on shortlist of invited bidders (variable, typically <1per cent of project value)

    —  Invited bidders frequently form an arisan (collusion among bidders with predetermined winner who will pay 1-2 per cent to each unsuccessful firm for submission of losing bids) at the suggestion of agency staff or contractors' association—GAPINSI for civil works—(or both). In a typical shortlist of 4-6 firms, payments to arisan members would total 3-1 0 per cent plus GAPINSI fee (2-5 per cent) plus a payment to members of the tender committee (3-7 per cent).

    —  Payments to contract signatory and/or GOI project manager, (pimpro) at the time of final award and contract signing (this is the single most variable element the "game" with reports ranging from 0 per cent—for international advisors in several acencies—to 35 per cent or more of contract value in local construction/consulting contracts awarded by some local units. MPW and other central ministries have attempted to limit/control these payments with reported averages of 7-12 per cent for international firms (often paid through local partners) and 12-20 per cent for domestic firms contracts or share of joint ventures; averaging 15 per cent of budget)

  Contract Implementation Period:

    —  Facilitation payments for required progress reports and invoice processing (1-3 per cent)

    —  Commissions to KPKN or other disbursement unit for payment of invoices (0.5-2 per cent)

    —  Political contributions and other demands by sponsor and/or GAPINSI (highly variable, but reports indicate many contractors were required to contribute 10 per cent to GOLKAR via GAPINSI within the past year, in addition to demands by local officials; perhaps 2-15 per cent)

    —  Business tax collectors are almost always willing to negotiate the tax bill (no net cost to contractor, but loss to GOI revenue of as much as 50-70 per cent of amounts due) Audits and Inspections

    —  Staff of BPKP and ministerial or provincial inspectorates are almost uniformly reported to be seeking to find issues or mistakes" in project implementation which can be fixed" or ignored in final audit/inspection documents for a fee (variable, from near 0 per cent to 10 per cent)

  Other Issues:

    —  Delays in GOI contract payments imposes interest costs on contractors (2 per cent per month)

    —  Where prefinance funds have been advanced to implementing unit, delays sometimes are the result of Pimpro wishing to collect interest on deposited funds (GOI system very poor in capturing/reporting such project level income or earnings)

    —  Substitution of lower quality materials is also a serious problem, but often specifications are not sufficiently tight to allow proper enforcement; bills of quantity are also inflated.

    —  Unit prices/billing rates are typically based on recent contract values which include margins for "average" levels of payments as noted above; thus diversion is included.

  Classification of GOI Implementing Units by Estimated Magnitude of Development Budget Diversion

  Estimated Diversions Agency/Ministry Comments

  Relatively Low (less than 15 per cent)

  * Relatively small percentages of very large numbers

  * Major problems with firms owned/related to senior GOI officials

  PLN, PGN, Telecoms, Jasa Marga, Min. of Health? Min. of Mines and Energy

  Moderate (15-25 per cent)

  Min of Public Works, Min of Education, Min of Agriculture, Min of Housing/Perumnas, Min of Environment, Min of Communications? Min of Religous Affairs? Min of Tourism, Post & Tel.?

  High (more than 25 per cent)

  Min of Home Affairs, including all provincial and local gov'ts. Min. of Transmigration, Min of Cooperatives & SMEs, Min of Forestry



  Several potential actions could be taken by the Bank to further enhance the transparency of our procurement processes. However, essentially none of the action options are viable without the full and active cooperation of GOI at very senior levels. The following may, thus, be best viewed as a discussion agenda for exploring with key GOI officials the steps which they may regard as politically and practically feasible for the near- and medium-term enhancement of our mutual procurement transparency.

  1.  Significantly tighten/restructure prequalification procedures for contractors and consultants wishing to participate in Bank-financed projects. In the view of many RSI staff and other participants in Bank projects, the single most important reform or strengthening of our procurement processes would be the serious application of stringent prequalification requirements to assure that only professional, capable bidders can respond to Bank-financed tenders for goods, works and services. This would require only that GOI enforce the prequalification regulations already in place for each implementing agency, although we could offer some suggestions for refining/improving the criteria for assessing and checking the potential contractor/consultant's prior experience claimed (see further on this point below). However, this would imply a major departure from current practice by nearly all GOI offices where now essentially anyone can be listed as a qualified contractor or supplier of any type of goods or works for which the applicant is willing to pay the registration fee. The prequalification process for domestic tenders is largely viewed as a revenue-generation process, rather than a serious screening of the quality of potential contractors. Even for consulting services where shortlists are generally developed for each potential assignment, most implementing agencies regard places on the shortlist as a commercial asset to be sold to the highest bidder with only minimal regard to the actual qualifications of potential consultant organizations. Three (3) additional steps could also be taken to assure the quality of potential contractors, suppliers and consultants for Bank-financed project implementation, as follows:

    a.  Develop procedures to identify firms owned/controlled by GOI officials or their family members at all levels of government, and proide all Bank project implementing agencies with a "negative list" of such firms not eligible to participate in the procurement process. This would obviously be a difficult and sensitive matter which would also require substantial continuous effort to keep updated, but may help to avoid many of the most serious distortions of the procurement process.

    b.  Place on the "negative list" for Ban-financed procurements all GOI-owned or sponsored firms (eg the MPW Karya" contractors and consultant firms, DKI?s partial ownership of Pembangunan Jaya, firms affiliated with BPPT, etc) Again, this would be a very contentious matter with the GOI agencies involved, but would remove the source of some significant past distortions in our procurement process.

    c.  Expand outreach and information activities, and streamline the procedures for international contractors, suppliers, and consultants to prequalify and participate in Bank-GOI tenders by all implementing agencies (perhaps including a "one-stop" prequalification clearinghouse (at EKKUWASBANG?) for international firms to register their capabilities and routinely receive notification of all tenders by any GOI implementing unit in their fields of qualification) to intensify competition. While the Bank could assist in the development of such procedures, it is quite likely that bilateral assistance, professional organizations and others would be quick to respond if GOI announced its intentions and requested assistance in this regard.

  2.  Advise GOI that the Bank will not routinely-finance works tendered as "reserved-for economically weak contractors" (typically Class C Qf the standard GOI prequalification system). These small contracts with weak contractors have been one of the most consistently problematic areas of the Bank's implementation portfolio. To the extent practical within each project, implementing agencies should be required to package civil works and gods into tender packages large enough to attract the more capable Class A and B contractors, with Bank financing offered for smaller packages only on an exceptional basis. (Note: Many GOI units also use this provision to limit potential contractors and suppliers to "pribumi"-owned business, excluding firms owned by Chinese Indonesians; this practice cannot continue to be condoned by the Bank.)

  3.  Modify composition and role of the tender committee to include independent members drawn from the community (local universities, targeted beneficiaries, NGOs or other appropriate project participants), perhaps even as a majority of membership, and expand the role of the committee to include all tender steps from contract package definition, through distribution of documents and evaluation of bids, to award and contract signing. The details of such a major modification to GOI tendering process would require serious discussion with GOI but could result in significantly changing the current decision-making structure. The key would lie with having truly objective and independent members appointed to the committee, which raises the obvious question of who would make the appointments. Would the Bank wish to have NOL review of the membership? The GOI would surely object.

  4.  Require wide-circulation newspaper advertising of all tender opportunities, provision of tender documents to all interested parties, and evaluation of all bids received from any qualified contractor/supplier (ie eliminate the common practice of restricting tenders to an invited shortlist of prequalified firms). This should produce a larger number of bids for each potential contract, which would clearly complicate the work of the tender committee, requiring additional time and budget for their work (the reason most commonly given for restricting the tender to invited firms).

  5.  Remove the contractors? association (GAPENSI) from any role in the tender process and agressively discourage the—formation of contractors cartels (arisan ).

  Current practices of posting tender announcements at GAPENSI offices as a primary form of tender advertising and consulting GAPENSI regarding the listing of invited tender participants, simply encourages the formation of "arisan" to rotate awards of contracts among a fixed set of firms, thus circumventing the intended open competition and allowing price-fixing to become commonplace. GAPENSI is also reported to be a primary mechanism of contractors' inappropriate access to budget and owner estimates. While the potential usefulness of GAPENSI in the prequalification process for civil works contractors is obvious, extending their (informal) role into the tendering process is clearly a serious problem to be addressed. The linkage of GAPENSI to the political system cannot be ignored, nor can the influence of GAPENSI on key appointments.

  6.  Insert the newly developed Bank anti-corruption clauses in all Bank-financed tender documents and open a confidential channel for reporting violations of tender procedures to the Bank-GOI prior to the award of contracts. Too frequently the Bank hears of alleged irregularities only after contracts have long-since been awarded and construction or other services performed, when our range of potential action is limited.

  7.  Develop performance evaluation sysutem for all Bank (or GOI) contractors and exclude poor performers (negative list) from future tenders. See companion paper on more general implementation process improvements, including AUDITS!!!

  Options for Bank-GOI action to reduce development budget "leakage" (Discussion Draft Only)

  1.  Based on intensive consultation with very senior GOI officials, develop an agreed anti-corruption action plan (ACAP) along the lines suggested in the Bank HQ Working Group report entitled "Helping Countries Combat Corruption: The Role of the World Bank Group". Such an action plan could include agreed initiatives from the menu noted below, as well as initiatives already underway by GOI and further ideas arising from our dialogue.

  2.  Particularly in light of the need to bring "on budget" at least parts of the informal remuneration now being paid to civil servants from the proceeds of the budget diversions, and the potential macroeconomic benefits of improved systems of governance, we may wish to use the possibility of Governance Improvement Adjustment Loan to focus the required attention of senior GOI policy-makers. Such an adjustment program could include broader civil service reforms and streamlining of GOI structure and procedures, in addition to implementation of the ACAP. I suspect that having a possible $400-500 million (or more) in play may focus their attention on real action options, more than a CPPR-type discussion of problems and actions. Such an adjustment operation could also explicitly support the accelerated privatization of additional BUMNs and BUMDs/PDAM including at local level markets, slaughterhouses, transport terminals, et al.

  3.  Implement an aureed tightening of Bank-GOI procurement processes, along the lines of the separate note on options for this tightening. However, for "problem units" (ie where diversion is known/suspected to be particularly high), including-the entire system of provincial and local governments, we have the option of requiring all procurement for Bank-financed contracts be handled by an independent Provincial/Regional Procurement Board to conduct prequaliflcation, tendering and bid evaluation in lieu of the normal tender committee. (Nothing in KEPRES 16 appears to forbid this as the Board could be designated by the implementing unit, as long as normal signature authorities were maintained.) Membership of the Board would be agreed between GOI and the Bank to include appropriate technical and community members.

  4.  Agree to finance realistic salary incentives/honoraria for staff of Bank project implementation units and appropriate operating budgets for the projects following the example of Bank health sector projects here (and many other projects worldwide), and encourage GOI and other donors to do the same. This would limit the budgetary impact of formally increasing compensation to only those civil servants working on development projects. (We could discuss broadening this principle with MenPAN.) However, the Bank could/should insist this be coupled with an announced and serious policy of zero tolerance for diversion of contract funds and serious penalties for any offenders.

  5.  Current unit prices/billing rates for essentially all goods, works and services procured by GOI include varying degrees of mark-up for diversion, as nearly all such prices are established from "standard unit prices" (as for MPW averaging recent contracts) or other measures of "current market prices". Efforts are underway (by Chitta B. and Frida) to analyse the pricing differential bet-Aleen public and private contracts for similiar works (Chitta), and between official versus community-based contracting (Frida). The preliminary results of these efforts seem to confirm mark-ups which average 15-40 per cent, but showing quite a range of variation. International unit rates in sectors such as power and telecoms tend to limit this mark-up in the truly international ICB procurements. The Bank and GOI could thus establish a baseline or "benchmark" set of unit prices and billing rates for use in Bank projects and require clear justification of any variance.

  6.  Tighter supervision of physical implementation by both GOI and the Bank could reduce the instances of padded bills of quantity (BoQ) in contracts, substitution of inferior quality materials or equipment, improved quality of physical outputs and "results on the ground" of Bank projects. Of course, the budget and staffing implications of such increased supervision would have to be assessed and apportioned between the Bank and GOI, with perhaps the most convenient . but also the most expensive, solution being the hirng of consultants mandated to perform the increased supervision.

  7.  The use of "empowered engineers/consultants" as contract managers is an option already in use by PLN and other project agencies (and widely used in other countries), and which has been agreed in principle with GOI at our most recent CPPR discussions. Several major implementing agencies, including NTW, seem to regard the empowering of "project engineers" (usually foriegners) as a retrograde step to earlier operational methods used by the Bank,, but discontinued in most sectors more than IO years ago due to (supposedly) growing in-house capacities in implementing units. Having such empowered consultants could be undertaken in conjunction with or separately from the independent procurement board noted in para 3 above, but if both are done it has the effect of taking control of the project (except contract signature) away from the GOI implementing unit, and would certainly raise serious objections.

  8.  Mechanisms to increase public information and facilitate public involvement are being tried in several Bank projects, perhaps most notably in the VIP program where public information boards displaying project location, design and costs are posted in each project community, together with telephone number and other instructions for submitting comments, questions or complaints. Many RSI staff commenting on the issue have suggested increased transparency and encouragement of public monitoring/comment as an important mechanism we could use to better assure contractor performance and results. Project or RSI "hotlines" or comment/complaint mailboxes were also suggested to assure that the public or project staff could provide information while maintaining anonymity.

  9.  From the perspective of the Bank's fiduciary responsibilities, perhaps the most blatant and serious issue for immediate attention is improvement in the quality and accuracy of project financial audits now conducted for most projects by BPKP.

  Most GOI project officers report visits by BPKP staff result in demands for payments in return for a "clean" (ie unqualified) audit of their accounts. In summary, the audit results on which the Bank relies for satisfying our Judiciary responsibilities are for sale! There are really only two basic options: attempt to fix the problems at BPYP to produce the accurate, independent audits required by our loan agreements, or find other (commercial) auditors who can do the job. We must decide if we believe BPKP is "fixable" and if so quickly proceed with a loan (along the lines of the recent BPK project, but much stronger) to address the problems and produce reliable audit reports. Otherwise, we must convince GOI to retain commercial auditors, which they have consistently refused for more than 20 years (it may require a serious threat to suspend lending, if we mean it). Expansion of our audit coverage to include contractors books is also an option posed by some staff members and the HQ working group on corruption; but, the obvious question quickly becomes: who would pay for such audits and to whom would the auditors report?

  10.  Curtail Bank financing of "soft" expenditures such as TA, consultancies, training, travel and other project cost which are easv to falsify and difficult to audit. While many Bank staff correctly assert that much of the long-term impact of our projects comes from the intangible or "soft" activities which focus on capacity-building, transfer of knowledge and overcoming skills shortfalls, as well as inadequate routine budget allocations, it is also undeniable that these activities have suffered from some of the most serious cases of diversions and fraud encountered by our projects. Tightening supervision, better Terms of Reference, improved documentation and payment based on performance/outcome have all been suggested as partial remedies applicable to some Bank projects and these have been generally discussed in recent CPPR meetings. However, the problem is significant enough to deserve a place on the agenda for policy discussions with GOI.

  11.  Continued improvement in GOI-Bank procedures for land aquisition and resettlement, focusing both on assuring adequate budgets and actual payments to the affected persons. As noted in the problem statement, even when adequate funds are budgeted, "leakage" in the process of land aquisition and resettlement compensation remains a serious issue in many cases. Establishing a special GOI commission for land issues (along the lines of the human rights commission) is an option which could be explored, but no one on the GOI side has even hinted. that it may be acceptable.

  12.  Finally, and perhaps most basically, there is a clear feeling from the staff that such issues have not received Bank management attention until recently and some uncertainty as to feasibility of pursuing this agenda with GOI, especially now in the run-up to the Presidential election in March. However, there is broad concensus among the staff that "the problem starts at the top" and there is a sincere willingness (even eagerness by some) to support Bank efforts to escalate dialogue on these issues to the highest possible levels in GOI in our attempt to produce a meaningful program of action.

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