The head of the World Bank, Paul Wolfowitz, says the biggest obstacle to economic growth in Indonesia is the country's endemic corruption.

World Bank President Paul Wolfowitz told reporters in Jakarta that he believed it was possible for Indonesia to increase its growth rate from around five percent up to seven percent or higher.

Wolfowitz said, in order for Indonesia to achieve this, it has to continue to fight corruption.

"Perhaps, the biggest obstacle to reaching that higher level is improving the investment climate in Indonesia," he said. "The most important thing, I think, for improving the investment climate is to maintain this effort to combat corruption, to develop government institutions that deliver services to the people and in a transparent and accountable way."

Indonesia consistently rates as one of the most corrupt countries in the world. Indonesian President Susilo Bambang Yudhoyono pledged to fight the widespread corruption when he won the country's first direct presidential election 18 months ago.

Since Mr. Yudhoyono took office, a number of regional ministers and national officials have either gone on trial, or been sentenced to prison terms for graft. But large areas of the government remain untouched.

Wolfowitz, a former U.S. ambassador to Indonesia in the 1980s, says rampant corruption under former President Suharto played a key role in the collapse of Indonesia's economy in the late 1990's.

The 1997-1998 Asian economic crisis contributed to the downfall of Indonesian dictator Suharto in 1998, ending more than three decades of authoritarian rule.

While Wolfowitz praised Indonesia's efforts to combat corruption, and Mr. Yudhoyono's efforts to build on Indonesia's democracy, he says more needs to be done.

"The more it is possible to provide honesty, and, certainty in the judicial system, I think, the country would benefit enormously," he said. "It would benefit if investors felt that contract disputes and other kinds of commercial issues were resolved in a clean and fair and honest way, and they do not feel that way now."

The World Bank has pledged a loan of $900 million to Indonesia this year to help boost economic growth, reduce poverty, and promote good governance.