A license to pillage<\/p>\n
The revelation of Texmaco's huge bad debts, which totaled
\nalmost US$1.3 billion to state Bank BNI, is surely just the tip
\nof the iceberg of accumulated excesses resulting from the abuse
\nof political power under the 32-year authoritarian rule of former
\npresident Soeharto, who surprisingly remains legally clean. It is
\na classic example of Soeharto's patronage system, through which
\nhe dispensed favors and licenses to break laws and rules to
\npillage the nation.<\/p>\n
The case serves only to substantiate what has for a long time
\nbeen public knowledge within the country and overseas, but which
\nwas, until recently, successfully covered up to remain above the
\nreach of the law. Major cracks only appeared in the system once
\nthe corrupt, collusive and nepotistic (KKN) empire was exposed,
\nfollowing the fall in May 1998 of its patron (Soeharto), and the
\nousting in October 1999 of his protege, B.J. Habibie.<\/p>\n
Last week's announcement by the Indonesian Bank Restructuring
\nAgency that it would probably recover only about 4 percent of the
\nRp 267 trillion ($38 billion) in bad credits from state banks
\nconfirmed the extent of the damage and how Soeharto's family
\nmembers and cronies had blatantly robbed the state banks and left
\nthem high and dry. These banks now need more than Rp 255 trillion
\nin recapitalization funds.<\/p>\n
It is a pity that Marimutu Sinivasan -- a savvy entrepreneur
\nwho started his textile business in the 1950s -- has become
\nentangled in the Soeharto KKN web. His core business -- textiles,
\nsynthetic fibers, garments, textile machinery and machine tools
\n-- is well suited to the needs of a developing economy such as
\nIndonesia.<\/p>\n
Sinivasan's international credit rating had been fairly high.
\nBut problems started cropping up when his Texmaco Group rapidly
\nembarked on massive expansion and diversification into steel,
\ntrucks and car parts. Sinivasan may have been overly naive not to
\nrealize that all large-scale business in Indonesia then had to
\npass through the Soeharto patronage system. The system controlled
\nthe central bank, state banks and the entire business licensing
\nsystem.<\/p>\n
The documents chronicling the KKN process of the Texmaco loan
\napplication, as leaked to the mass media early this week,
\ndisclosed how Sinivasan's ambitious investment expansion led him
\nto a severe financial crisis. The huge devaluation in the rupiah
\nsteeply raised Indonesia's country premium risks, consequently
\nshutting down Texmaco's access to the international debt market
\nand forcing Sinivasan to ask for favors from the Soeharto KKN
\nclub. Now he must face the law.<\/p>\n
The documents also revealed how a memo from Soeharto acted as
\nan authoritative license for bank directors and the central bank
\ngovernor to break laws and rules without any fear that they would
\neventually have to account for their actions.<\/p>\n
What makes a mockery of any sense of justice in the case was
\nthe effortlessness of the multimillion dollar loans at a time
\nwhen the rupiah was under great pressure and the nation had to
\nkneel before the International Monetary Fund to obtain emergency
\nforeign exchange reserves.<\/p>\n
We hope the great fanfare in which the Texmaco case was
\nrevealed will not be relegated and forgotten like so many other
\ninstances of abuse uncovered under the Soeharto and Habibie
\nadministrations.<\/p>\n
There are disappointing precursors: consider for instance the
\ncorruption cases against Soeharto's youngest son Hutomo Mandala
\n\"Tommy\" Putra and Beddu Amang, former chief of the National
\nLogistics Agency. Both cases were thrown out of court. The Timor
\ncar project, the multibillion dollar clove monopoly, the
\nmultimillion dollar Balongan refinery fraud -- all of which were
\noutright KKN businesses from the outset -- are only a few of many
\nbig KKN cases that remain untouched by the law.<\/p>\n
Good governance has been proclaimed by President Abdurrahman
\nWahid to be one of the top priorities of his administration, so
\nAttorney General Marzuki Darusman should go all-out to expose the
\nmountain of past KKN practices. Only then will it be proved to
\nthe people and the international community that Indonesia is
\ndetermined to root out corrupt practices from its bureaucracy and
\nbusiness world.<\/p>\n
The task is obviously an uphill one; one Marzuki cannot change
\nthe system overnight, and hundreds of big KKN cases are waiting
\nto be unraveled. To face the daunting task, Marzuki must
\nestablish working priorities. He should first establish a core
\nteam of highly competent and honest prosecutors, assisted by
\nfinancial experts. He should assign the prosecutors to zero in on
\nseveral high-profile instances of KKN to send a warning to
\nofficials and the business community that from now on they must
\neradicate the culture of corruption from their activities.<\/p>\n
However, the risks of a new KKN empire arising remain great as
\nlong as ministers and officials are not subject to higher
\nstandards of accountability but can instead hide behind the
\nPresident's power, as those under Soeharto did. Marzuki should
\ntightly shut this escape route by forcing sycophant officials,
\ncabinet ministers and all other assistants to the President to
\naccount for their acts before the law.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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