Hollow promises<\/p>\n
The government's reiteration last week of its determination
\nto take legal action against bad bankers and bad debtors
\nresponsible for at least Rp 150 trillion (US$17.5 billion) in bad
\ndebts, or more than 40 percent of Indonesia's gross domestic
\nproduct, rings hollow given its dismal performance in handling
\nthe banking crisis which has been plaguing this country since
\nNovember 1997.<\/p>\n
Sixty-four banks have been closed and 19 others taken over
\nsince the crisis began, and although Bank Indonesia has often
\nstated most of the insolvent banks violated prudential banking
\nregulations, none of the bankers have been brought to court.
\nPeople are incensed that while the authorities have used hundreds
\nof trillion rupiah in taxpayers' money to reimburse the
\ndepositors and creditors of the bankrupt banks, those responsible
\nfor robbing their own banks remain virtually untouched.<\/p>\n
What rubs salt into the wound, deeply hurting people's sense
\nof justice, is the fact that many of the former owners of the
\ninsolvent banks are also among the biggest bad debtors partly
\nresponsible for leading the seven state banks into technical
\nbankruptcy.<\/p>\n
The government has foreclosed on the assets of some bad
\nbankers and bad debtors. However, this measure, besides being
\nperceived as blatantly discriminatory against those who no longer
\nhave political backing, was often too late to salvage state funds
\nbecause most of the assets had already either been sold or
\ntransferred to other domestic owners or moved overseas. In many
\ncases, the value of the assets used to secure loans had been
\nmarked up so sharply that what funds could be recovered by the
\ngovernment was paltry.<\/p>\n
The government promised the hallmarks of the massive bank
\nrestructuring program launched on March 13 would be full
\ntransparency and strong legal enforcement. However, the launch of
\nthe program was so lacking in technical details that people
\nremained in the dark about such vital information as which of the
\nailing banks had violated prudential banking regulations, making
\nthem liable to criminal proceedings according to the law on
\nbanking, and which banks were closed simply because of the
\ncountry's inimical macroeconomic conditions.<\/p>\n
The central bank and the finance ministry reneged on their
\npromise to make public the list of blacklisted bankers, arguing
\nthat such a disclosure would violate the principle of presumption
\nof innocence and might make the authorities liable to litigation.
\nThis excuse, similar to various legal pretexts used by the
\nauthorities to defend their laxity in prosecuting those suspected
\nof corruption, only further damaged the government's integrity.
\nTo fulfill its promise of full transparency, the central bank
\nshould have announced the names of banks violating prudential
\nbanking regulations, as well as the composition of their
\nmanagements and shareholders.<\/p>\n
The government not only failed to restructure the state banks'
\n20 largest debts on April 30 as scheduled, it did not even dare
\ndisclose the 20 biggest debtors even though the law on banking
\nrestricts the scope of the secrecy provisions to depositors.<\/p>\n
People are even being kept in the dark about the 74 banks
\nclassified as sound last March because the fit-and-proper tests
\nmeant to assess the competence and integrity of their managements
\nand shareholders and the evaluation of their business plans were
\nnot completed by the April 21 deadline.<\/p>\n
The authorities have been so politically impotent and
\ntechnically incompetent in handling the mess in the financial
\nsector that a sound banking system so vital to reviving
\ninvestment and leading the country to economic recovery has
\nbecome more and more elusive.<\/p>\n
It seems useless to even mention that the government has
\nfailed miserably in law enforcement and transparency, the
\nbedrock of the financial system.<\/p>\n
The government therefore has no other alternative but go all
\nout now to complete proper and credible debt and bank
\nrestructuring within the next few months; that is if it is really
\nserious about restoring investor confidence in the economy.
\nWithout credible debt and bank restructuring, all the other
\npainful reform measures taken to lead the economy toward
\nsustainable recovery and growth will have been rendered useless.
\nAnd the economy will remain in the grip of paralysis.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/hollow-promises-1447899208",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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