WRITE for ATol ADVERTISE MEDIA KIT GET ATol BY EMAIL ABOUT ATol CONTACT US
Asia Time Online - Daily News
             
Asia Times Chinese
AT Chinese



    Southeast Asia
     Mar 11, 2010
End in sight for Bank Century circus
By Gary LaMoshi

DENPASAR, Bali - An investigation of Indonesia's Bank Century, which required a bailout in 2008 that eventually climbed to 6.7 trillion rupiah (US$720 million), has been taken up by the quasi-independent Corruption Eradication Commission (KPK), a move that should end the political circus surrounding the looted lender.

KPK investigators can now focus on so far unsubstantiated charges that legislators have flung at the government as well as bankers yet to be tried for participating in the fraud. Months of opposition grandstanding have found no evidence to back charges that bailout funds were siphoned to last year's re-election campaign of President Susilo Bambang Yudhoyono (SBY) or to members of his cabinet.

Attempts to tar Vice President Boediono, the central bank chief at

  

the time of the bailout, and Finance Minister Sri Mulyani Indrawati with the corruption brush have also come to naught. The pair of technocrats who authorized the bailout came into the scandal with sterling credentials internationally, burnished by keeping Indonesia's economy growing despite the global recession. They'd also steered clear of Indonesia's political cesspool, which made them tempting targets for mudslinging lawmakers.

Parliamentary efforts to ignite Bank Century into a full-blown crisis likely fizzled last week. The House of Representatives voted 325-312 that the bailout violated laws, directing law enforcement agencies to investigate further. Three of the erstwhile partners in Yudhoyono's ruling coalition - Golkar, the United Development Party and Prosperous Justice Party - voted with the opposition in an embarrassingly undisciplined session.

Yudhoyono's allies headed off a more damaging proposal that would have specifically accused Boediono and Mulyani of wrongdoing. They look set to retain their cabinet positions, much to the relief of the international financial community.

As Indonesian banking scandals go, Bank Century is a relatively straightforward affair. Regulators began uncovering Bank Century's problems in 2005, and by late 2008 the bank faced a liquidity crunch that led to a wave of withdrawals, putting it on the verge of collapse. With financial turmoil spreading globally from Wall Street, Indonesian authorities believed that a bank failure - even a small one such as Bank Century - could put the entire banking system at risk and shatter international confidence in Indonesia's finances.

Eleven years after
The government instinctively feared a possible repeat of the 1997-98 Asian financial crisis in which Indonesia suffered the most damage. Then, the rupiah's exchange value fell to one-sixth of its pre-crisis level, wreaking economic havoc that spawned political turmoil, deadly rioting, and at least one near military coup. Recovery in some areas of the economy remains spotty, even a dozen years later.

Central bank chief Boediono ordered the Bank Century bailout and Mulyani, as head of the president's Financial System Stability Committee, approved it under authority granted by Yudhoyono. Because the president was traveling at the time, Mulyani said she informed then-vice president Jusuf Kalla of her decision by text message. State regulators took over Bank Century on November 21, 2008, estimating that the bailout would cost 670 billion rupiah, one-tenth of the final amount. At the time, there was scant opposition to the move, and many legislators voicing outrage last week had spoken in favor of the bailout in 2008.

Law enforcement officials moved swiftly to arrest Robert Tantular, a key Bank Century shareholder, and issued arrest warrants for Hesham Al Warraq and Rafat Ali Rizvi, who owned a majority stake through their company, Gulf Asia Holdings. Tantular was convicted of fraud last September, receiving a four-year sentence and a fine of 50 billion rupiah, a fraction of what auditors say was his share in fraud that totaled as much as 25 trillion rupiah. Authorities reportedly have recovered just 13.7 billion rupiah of the bank's missing funds.

Following the trial, Rizvi issued a joint statement with Al Warraq denying links with Tantular and offered to cooperate with police if they dropped charges against them. The pair remain fugitives sought under international warrants. They are believed to be in Singapore, which has no extradition treaty with Indonesia.

Kalla awakens
The Bank Century saga may have ended there, pushed from the spotlight by last year's presidential campaign that culminated in Yudhoyono's landslide re-election in July and bomb blasts that rocked two Jakarta luxury hotels just a week later. But before his vice presidential term ended on October 20, Kalla - who ran against Yudhoyono for the presidency - began raising questions about the Bank Century bailout nearly a year after the fact, challenging its legality on the basis that he wasn't consulted at the time.

Kalla's questions gave opposition lawmakers - riled that Yudhoyono had won so handily andhad assembled a six-party coalition representing three-quarters of the votes in the House of Representatives - an opening to attack the new government. The Bank Century issue suited politicians because House members had no role or responsibility for it, giving them unbridled opportunity to accuse and fulminate without consequences.

Legislators charged that the bailout funneled campaign funds to Yudhoyono's Democrat Party and tried to link the rescue to last year's other sizzling post-election scandal, a plot by police and court officials to frame KPK members.

To be sure, there are legitimate questions about the Bank Century bailout, such as where did all the money go and why did the original estimate of the bailout cost subsequently skyrocket. But it also presents an opportunity to address the broader bailout process and bank regulation, with an eye toward reform. Instead, lawmakers turned the bailout into a witch hunt to fight rather than champion reform.

Target of opportunity
Yudhoyono's overwhelming mandate and his second-term cabinet, minus first-term elements of the corrupt establishment who tied business to politics, made it crucial for entrenched interests to strike back. "They found their chance in Bank Century," Wimar Witoelar, spokesman for former president Abdurrahman Wahid, said. "The case was taken over by serious money, acquiring politicians and media support in the most cynical cabal since 2001" when reformer Wahid was ousted from the presidency on phony corruption charges, he claimed.

Witoelar placed Golkar chairman and Yudhoyono first-term minister Aburizal Bakrie at the center of efforts to discredit Boediono and Mulyani, even though Golkar is part of Yudhoyono's ruling coalition. Bakrie and Brothers, the family conglomerate, a bedrock of the business establishment that prospered under Suharto, has a pending tax case that could cost it up to 10 trillion rupiah, and Witoelar believes that sparked a vendetta against Mulyani.

Yudhoyono could have put an end to the Bank Century distraction months ago if he had staunchly defended Boediono and Mulyani, which he belatedly did following the House vote last week. Instead, he let lawmakers and anti-corruption protestors - supporting, if not supported by, the most hardcore corrupt elements in Indonesian politics and business - have their shout. He also offered conciliatory words to the coalition parties that had voted with the opposition.

Critics have long said that Yudhoyono isn't tough enough on his political enemies. It is true that no one has emerged to replace Kalla and enforce a measure of discipline among lawmakers, but the president can be forgiven for acting dismissively in the face of a blatantly political exercise lacking in logic or substance. In the bigger picture Yudhoyono apparently sees keeping his coalition intact as a blueprint for progress, creating a legacy of government by cooperation and persuasion rather than corruption and payoff.

Unfortunately, entrenched opponents of good governance, whether they call themselves partners or opponents of the ruling coalition, will be waiting for their next opportunity to derail those reform efforts. They hope Yudhoyono's relatively clean regime will be an interlude, not a turning point, in Indonesia's history of venal politics.

Longtime editor of award-winning investor rights advocate eRaider.com, Gary LaMoshihas written for Slate and Salon.com, and works an adviser to Writing Camp (www.writingcamp.net). He first visited Indonesia in 1994 and has tracking its progress ever since.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)


Scaled-back expectations in Indonesia
(Jan 28, '10)

Reform hopes fade in Jakarta
(Dec 16, '9)

Yudhoyono sees coups round every corner (Dec 15, '09)


1. Marjah, the city that never was

2. Politicians in bed with India's 'pimp gurus'

3. US ponders China's Southeast Asian rise

4. Alternative reading of Hamas murder

5. Oscar night in Baghdad

6. 'Bless you Mr Obama' on Myanmar

7. The great game - asset-trader style

8. China hangs fire on Iran-Pakistan pipeline

9. The PLA raises its voice

10. Accelerator jammed

(24 hours to 11:59pm ET, Mar 9, 2010)

asia dive site

Asia Dive Site
 
 



All material on this website is copyright and may not be republished in any form without written permission.
Copyright 1999 - 2010 Asia Times Online (Holdings), Ltd.
Head Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East, Central, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110