Thu, 17 Aug 2006
[This is a copy of "corrections" made by the Indonesian government to an IMF report. Full text of "corrected" 66-page report is available at ]

Comments of the Indonesian Authorities
on the External Evaluation Report on the Legal and Judicial Reform Program Funded
by the IMF's Netherlands Technical Assistance Subaccount

A. Comments on the Introduction to the External Evaluation Report

1. Page 1, first paragraph, third sentence: With regard to the collapse
of the Indonesian economy during the Asian financial crisis in mid-1997,
the external evaluation report states that: "Unlike other countries in
the region, however, Indonesia's collapse was underlain by the failure
of the Indonesian state, whose principal institutions had long since
lost integrity and competence during nearly forty years of the Guided
Democracy and New Order regimes." The authorities' view is that this
sentence should not be included in the report unless it also mentions
other factors that contributed to the economic crisis, such as the
manipulation of currency exchange values and the breakdown of the
private sector.

2. Page 1, first paragraph, fifth sentence: In describing the evolution
of the IMF technical assistance program (hereinafter, "TA program), the
report states: "In one of the most complex countries in the world, the
program evolved with its own complexity from a new set of commercial
courts, through attention to more basic judicial reform focused on the
Supreme Court (Mahkamah Agung), to the extraordinarily difficult problem
of imbedded corruption." The authorities find the reference to Indonesia
as "one of the most complex countries in the world" to be unrelated to
the rest of the sentence. They would prefer this phrase to be
substituted with: "In one of the States that suffered the greatest
impact of the 1997 economic crisis, . . .."

3. Page 1, first paragraph, seventh sentence: Finding that the problems
the TA program was designed to address were intractable and that there
was little useful guidance on how to tackle them, the external
evaluators noted: "There were blind alleys and mistakes, but no single
approach was simple and none had obvious or convincing precedent
elsewhere." The authorities state that the sentence incorrectly implies
that no guidance whatsoever could be found within the Indonesian legal
system, and point out that the experience of the Supreme Court and the
bankruptcy regime in Indonesia provided useful precedent.

B. Comments on the Section of the Report Regarding the Commercial Courts

4. Page 7, first paragraph, third sentence: With regard to the
establishment of the Commercial Courts in 1998 to handle bankruptcy
cases, the report states that, at the time, as Indonesia lacked a
credible legal system, specialized bankruptcy courts were intended to
provide competent, quick, reliable decision making and thereby serve as
a means of restoring investor confidence." The authorities emphasize
that Indonesia did have a credible legal system at the time that was
capable of handling bankruptcy cases, but that the unprecedented crisis
engendered an overwhelmingly detrimental impact upon the legal system.
The sentence should be rephrased along these lines.

5. Page 10, first paragraph, first sentence: In discussing problems
faced by the TA program in relation to its Commercial Court activities,
the evaluators were of the view that "Indonesia's level of commitment to
the Commercial Courts hampered development." The authorities question
how their commitment to the development of the Commercial Court was
measured by the evaluators and whether there are any tangible indicators
for reaching such a conclusion. If there are such indicators, the report
needs to state them.

6. Page 10, first paragraph, fourth sentence: Still in the context of
discussing problems faced by the TA program in relation to its
Commercial Court activities, the evaluators observed that "civil society
lacked enthusiasm for bankruptcy reform. Thus, a weak sense of ownership
for specialized bankruptcy courts diluted the widespread support needed
from court leaders, government decision makers and civil society
activists to make the Commercial Court a credible and viable separate
institution." The authorities find these statements to be undue
generalizations of the views of civil society and public officials,
including court leaders. Moreover, the authorities point out that civil
society in Indonesia is relatively young and some of the perceived lack
of enthusiasm and ownership stems from the fact that civil society
organizations are still in the process of finding their way. The
sentences, therefore, need to be more comprehensive and balanced and
should be based on thorough research.

7. Page 13, first paragraph, first sentence: In assessing program
quality in relation to the TA program's Commercial Court activities, the
report found that: "From the beginning, efforts to establish the
Commercial Courts strove to gather input from outside the judiciary
which was insular and resistant to reform." While acknowledging that the
public and the judiciary may be rather slow in digesting reforms that
are happening, the authorities emphasize that neither the public nor the
judiciary are, however, insular or resistant to reform. The sentence
should thus be rephrased accordingly.

8. Page 13, second paragraph, sixth sentence: Still also in assessing
program quality in relation to the TA program's Commercial Court
activities, the report found, with respect to an interdepartmental
steering committee supported by the TA program that: "Although the
Steering Committee was slow to engage in its mission, performed
inconsistently, and seemed at times to serve as a front for the IMF and
this Program, the Program's support, along with strong assistance from
Bappenas, helped to keep it operating and enabled it to become a
productive vehicle for channeling stakeholder participation." The
authorities believe that this statement should be balanced by pointing
out some of the factors that slowed the work of the steering committee,
such as time constraints and technical problems.

9. Page 15, third paragraph, fourth sentence: In connection with the TA
program's work with relevant insolvency professions, a further finding
in the section of the report assessing program quality was that:
"Disciplining legal professionals is practically nonexistent in
Indonesia." In the context of the particular paragraph, the authorities
find that this sentence is unnecessary and irrelevant and should,
therefore, be omitted.

10. Page 16, second paragraph, first sentence: In evaluating program
outcome with respect to the Commercial Court, the evaluation found that:
"Apart from their explicit functions, the Commercial Courts were
implicitly expected-though 'hoped' may be more appropriate-to serve as a
model of sorts for the established judiciary." In the view of the
authorities, the use of the phrase, "-though 'hoped' may be more
appropriate word-", is an unnecessary comment and should be omitted.

11. Page 18, carry-over paragraph, sixth sentence: In concluding their
evaluation of the TA program in relation to the Commercial Court, the
evaluation team stated that "Indonesians generally lacked sufficient
commitment to specialized bankruptcy courts to secure their proper
development." The authorities' view is that this sentence should be
omitted as it over-generalizes, is indiscriminate, and is ineffective.

12. Page 18, carry-over paragraph, eighth sentence: The evaluation team
also concluded with respect to the TA program's Commercial Court
activities that: "Certainly, the stated objectives were overly ambitious
and not realistically achievable." The authorities response is that the
sentence needs to be omitted unless put into context by emphasizing the
short duration of the TA program relative to the tasks at hand and the
level of expertise available within the judicial system. C. Comments on
the Section of the Report Regarding the Supreme Court

13. Page 19, first paragraph, second sentence: The evaluation makes the
point that it became clear to the IMF that, if the commercial courts
were to render effective service, the core of the judiciary would, at
some point, have to become a focus of reform attention. In this regard
the report states: "Had existing courts proved competent to manage
bankruptcy cases, there would have been no need for new Commercial
Courts, whose creation was an emergency stopgap measure that still
required a favorable institutional environment." The authorities believe
that this statement should be rephrased as it seems to focus blame
exclusively on the credibility of the Indonesian legal system at the
time, but fails to take into account the extraordinary nature of the
massive number of bankruptcy cases, the role of external speculators,
and the role of other state organs.

14. Page 19, third paragraph, third sentence: In the context of a
discussion of a window of opportunity for reform opened up by the
appointment of a new Chief Justice and of new Supreme Court justices,
the report notes: "As new Supreme Court justices were selected by
Parliament in an uncertain process, the results did not always predict
success in transforming the Court, but the breakthroughs nevertheless
made possible the introduction of a reform agenda to which the new Chief
Justice made clear that he was enthusiastically committed." The
authorities find this sentence to be biased, inconsiderate, and without
any showing of proof. They assert that the fact of the matter is that
the Indonesian parliament has its own mechanism to appoint Supreme Court
Justices, which is legally regulated based on the Constitution. While
this system may differ from that employed in other countries, that is
not sufficient reason to question it. At a minimum, the basis for the
statement should be clarified.

D. Comments on the Section of the Report Regarding Anticorruption

15. Page 27, first paragraph, first sentence: The report introduces the
section evaluating the TA program's anti-corruption-related activities
with the statement that: "The prevalence of corruption throughout
Indonesia's judicial system is well known and requires little
introduction." The authorities suggest that the words "and requires
little introduction" are gratuitous and should be omitted.

16. Page 29, third paragraph, third sentence: In describing the problems
faced by the TA program in relation to its anti-corruption-related
activities, the evaluators state that: "As an institution, the Public
Prosecution Office had been notoriously resistant to reform and an
unreliable development partner." The authorities' view is that this
sentence is not based on factual evidence since, from the early 1990s,
there were already ongoing reforms taking place in the Public
Prosecution Office. The authorities point out that, while the reform
progress has been slow, this does not mean that the Public Prosecution
Office is "notoriously resistant to reform". The sentence should either
be rephrased accordingly or omitted.

17. Page 30, third paragraph, second sentence: With regard to the
assessment of program quality in relation to anti-corruption-related
activities, the report, referring to KPKPN (the agency responsible for
the administration of the wealth declarations of public officials),
observed that: "The KPKPN's uncertain future as part of the
Anticorruption Commission made ongoing assistance difficult." The
authorities recommend that this sentence should elaborate further on
what kind of difficulties the KPKPN is said to have caused for program

News Search/Filter
Transaction Rates
21 Oct 17
Taxation Exchange Rates
31 Aug 16 - 06 Sep 16
JPY 100

Okusi Associates: Indonesian Business & Management Services