Macroeconomic policy, banking management need reform<\/p>\n
JAKARTA (JP): Laksamana Sukardi obviously does not fit the
\nnorm. His priority is not the pursuit of wealth and a high
\noffice.<\/p>\n
He could have stayed in his previous job as managing director
\nof Lippo Bank and moved on to reach the pinnacle of his career
\nin banking.<\/p>\n
Instead, he quit his job and joined the Advisory Group in
\nEconomics, Industry & Trade (Econit) founding the Reform
\nconsulting group, long before anybody seriously discussed
\neconomic and political reforms (Reformasi).<\/p>\n
In the political domain, he joined the Indonesian Democratic
\nParty (PDI). Following an internal leadership rift in the party,
\nhe sided with the Megawati Soekarnoputri camp, which has often
\nsuffered at the hands of the government for its outspokenness and
\nsharp criticism.<\/p>\n
This transformation was based on Laksamana's hope to have more
\ninfluence in the development process of his country. This, he
\nbelieved, could be better accomplished by becoming an economist
\nand a politician.<\/p>\n
The 42-year old father of three children graduated as an
\nengineer from the prestigious Bandung Institute of Technology
\n(ITB).<\/p>\n
The following is an interview with the former banker.<\/p>\n
Question: How do see Indonesia's current financial and banking
\ncrisis?<\/p>\n
Laksamana: The current problem is how to restructure the
\nbanking sector. Unlike in Japan and the United States, there has
\nnever been a correction of Indonesia's banking system. All of the
\nproblems accumulate. We do not remove the problems, but carry
\nthem over and over. Eventually there will be an explosion.
\nUnfortunately, the explosion has occurred at the same time as the
\npolitical upheaval.<\/p>\n
Former president Soeharto, during his rule, could have
\nundertaken a fundamental correction when Indonesia's economy was
\nbooming. At that time, it would have been a different situation,
\nmuch better than it is now, when the banks and the government
\nhave lost confidence. Now, the banks are also facing a very
\ndifficult time, whilst the government lacks political legitimacy.<\/p>\n
Government measures to restructure the banking system are very
\npainful and unpopular. Any painful and unpopular decisions must
\nhave legitimation and strong leadership. The government cannot
\nshow partiality based on their own gratification. There must be a
\ntotal solution.<\/p>\n
Q: What actions are needed for this total solution?<\/p>\n
L: Transparency. We have to be transparent in establishing who
\nhas violated the regulations and who has not; who should be
\nprosecuted and who should not.<\/p>\n
In the banking system, problems are basically caused by two
\nthings -- errors in the macroeconomic policy and banking
\nmanagement. Errors in macroeconomic policy can effect sound banks
\nas well.<\/p>\n
With an improper macroeconomic policy, it's not fair to charge
\nthe responsibility to bankers alone.<\/p>\n
Meanwhile, errors in banking management consist of criminal
\nand non-criminal actions. Over-expansion is a form of ignorance
\nand shows a lack of professionalism. Financing or extending loans
\nto affiliates on the other hand is a crime and must be
\ninvestigated.<\/p>\n
Q: What do you think about the investigations which have begun
\ninto some bank commissioners and executives?<\/p>\n
L: I think the criteria is unclear. The authorities have summoned
\nbankers without any clear reasoning. There must be clear audits
\nfirst. Violations must be thoroughly classified as involving
\ncriminal activity or ignorance. There must also be total
\nsolutions, including improvement in the role of Bank Indonesia
\n(BI), the central bank.<\/p>\n
Its role must be reviewed. We understand that in the past, the
\ncentral bank's governor and directors were selected by the
\nSoeharto family. That is why BI's executives did not have any
\npolitical power. They pretended that there was never anything
\nwrong.<\/p>\n
Also, we have not seen any actions against state-owned banks,
\nwhere \"there are too many skeletons in the closet.\"<\/p>\n
Q: How can we develop transparent criteria?<\/p>\n
L: There must be an independent commission, appointed directly by
\nthe President and mandated by the House of Representatives (DPR)
\nbecause the commission is to deal with inter-disciplinary
\naffairs. So, a body like the Indonesian Banking Restructuring
\nAgency (IBRA) should have a mandate from the DPR. The
\nchairmanship of such a commission needs to have real power. If
\nthe members do not have power, they will be greeted by closed
\ndoors. The problem will never be solved, even though there is a
\nvery prudent program supported by expensive foreign consultants.
\nPolitical backup is necessary.<\/p>\n
Q: How bad is the banking problem in Indonesia now?<\/p>\n
L: It is bad because we have postponed corrections for such a
\nlong time. Now, with political upheavals and lack of a public
\nmandate from the government, any action is always criticized. We
\nstill have a long way to go.<\/p>\n
Q: Is transparency the most important thing despite an excessive
\nnumber of banks operating in Indonesia?<\/p>\n
L: Yes. I don't see any problem with hundreds of banks operating
\nin Indonesia if there is transparency. In a market economy, there
\nwill be natural mergers. But in Indonesia, mergers are very
\ndifficult because each bank has its own problems. Banks refuse to
\nmerge with each other. There is no consolidation based on market
\nforces.<\/p>\n
Q: Is there any other way to solve this problem?<\/p>\n
L: There is no other way, but to involve overseas banks. Some
\nmembers of the House have expressed concern over this prospect,
\nbut they have not offered any other solutions. The other problem
\nis that the government does not have the money to recapitalize
\nthe banking system.<\/p>\n
Q: What do you hope to achieve by inviting foreign banks to
\nIndonesia?<\/p>\n
L: Firstly, the main priority is to restore confidence. We have
\nto create a positive environment. Even news about a foreign bank
\nexpressing interest in buying a domestic bank creates more
\npositive sentiment. In restoring confidence, the role of foreign
\nbanks is very important. If this scheme is workable, it means
\nthat a foreign investor trusts in Indonesia. Then the public may
\nalso trust the management.<\/p>\n
Q: Is this the best way?<\/p>\n
L: What can we do in a situation like this to restore confidence
\nin the banking industry? In inviting foreign banks, however, we
\nneed to be careful about the creation of employment. This is all
\nabout transfer of know-how, so there must be regulations
\nregarding foreign and domestic employees.<\/p>\n
Q: What else do you think should be done?<\/p>\n
L: It is necessary to conduct an audit of good faith. Bankers (of
\nliquidated banks) can deliver their assets to IBRA to
\ndemonstrate their good faith. Other banks must also be audited to
\navoid a partial solution.<\/p>\n
Q: Do you think a person needs a specific character to run a
\nbank?<\/p>\n
L: We made a mistake in the past (with a policy encouraging more
\npeople to operate banks). There have been so many bankers, but
\nthey do not understand the industry, they are not professional.
\nIt is only in Indonesia that a banker can also operate a large
\nproperty business. In the United States, for instance, this would
\nbe considered a conflict of interest, so a businessman like
\nDonald Trump cannot run a bank like Citibank. We have to remember
\nthat state supervision has also been very poor. Many bankers
\nhave violated the legal lending limit. But it would also be
\nfoolish to limit the number of people who own banks. The
\nmanagement of the banks, therefore, must become more professional
\nand be able to avoid collusion with the owners. Many of the
\npresidents of domestic banks continue serve their owners
\ninterests.<\/p>\n
Q: How do you see the role of BI, currently?<\/p>\n
L: It's difficult to see that BI's current governor and
\nexecutives are not part of the old regime. They were appointed by
\nSoeharto. The governor should have been selected by the House of
\nRepresentatives (DPR) from nominees of the President. The
\nPresident should not be able to sack the central bank's governor
\nand executives. But, that's it. We have to admit this relates to
\nour political system.<\/p>\n
Q: Why so?<\/p>\n
L: Firstly, we do not have an independent judiciary system. It is
\nimportant to create an independent judiciary system. Secondly, we
\ndon't have the power of democracy. Without these, anything is
\npossible. Though the central bank is independent, it is very
\ndifficult to act properly without democracy. Though BI is
\nindependent, the judiciary system is not independent. If there is
\na legal dispute, the winners are usually those who have the power
\nto intervene in the justice system. Finally, people do not have
\nthe motivation to create a better situation and feel useless.<\/p>\n
Q: Does this still occur now?<\/p>\n
L: The current government is continuing Soeharto's policy. There
\nis also no improvement in democracy. Members of the House and the
\nPeople's Consultative Assembly (MPR) are not the true
\nrepresentatives of the people. There is no significant progress
\nat all.<\/p>\n
In creating solutions for the banking system, the government
\nmust also see justice and democracy as very important - meaning
\nthat BI must also become a truly independent body with its
\nexecutives elected by an independent parliament. If there is a
\nlegal case, it should go to court, so there will be no trade in
\njustice. But, it is useless if BI's governor is selected by the
\nHouse if its members are not empowered.<\/p>\n
Q: How can we come out from current crisis?<\/p>\n
L: In addition to the banking restructure, we need to pay
\nattention to the private debt problem and corruption practices.
\nNobody will trust Indonesia with such huge debts still
\noutstanding. Meanwhile, we need to establish a body, for instance
\na presidential commission, for anti-corruption. By these efforts
\n(bank restructuring, private debt solutions and an anti-
\ncorruption drive), we will begin the process of confidence
\nbuilding.<\/p>\n
Q: How can you be so sure?<\/p>\n
L: The issue is beyond the economy. We need to restore
\nconfidence. Once confidence is restored, the money should start
\nflowing in, people will start trusting in the banks, the economy
\nwill improve, as will exports and the current account and
\ngovernment revenue will increase. Everything will work normally.
\nI have a very high level of confidence in Indonesia in the longer
\nterm, but we must regovern this country.<\/p>\n
Q: How are you channeling your ideas?<\/p>\n
L: I have always intended to channel my ideas to enrich the
\npeople. To this end I joined PDI, but it has been very difficult
\nto bring our aspirations to public attention because of
\ngovernment restrictions. That is why I created independent
\nconsultancies.<\/p>\n
But in this so-called reformation era, I am concentrating on
\nthe PDI to channel my ideas. As a treasurer, I can contribute my
\nideas as the party's platform in the future.<\/p>\n
Q: How do you see people's aspirations?<\/p>\n
L: People can not be cheated any longer. What is legal according
\nto the government is not supported by the public.<\/p>\n
Law is the crystallization of people's aspirations, which are
\nchangeable. If there is a law or regulation which is no longer in
\naccordance with people's aspirations, the law must be changed.
\nThe problem is that many regulations have been created to stifle
\npeople's aspirations. To some extent, this is the source of the
\ncurrent crisis. People do not have an aspiration channel. They
\nfeel they are not being represented by the House.<\/p>\n
Then they go into the streets. In the meantime, the current
\ngovernment still uses the previous law. Unfortunately, the
\ngovernment feels it is always right. It has no capacity to
\nunderstand that it is sometimes wrong.<\/p>\n
Q: How do you concentrate your activities now?<\/p>\n
L: In a situation like this, I concentrate on politics. I joined
\nPDI to comprehend politics. PDI was previously considered like
\nthe lowest caste in this country, but now it is very popular. But
\nthis is not easy, either. I spend a lot of time working for PDI,
\nsupporting Megawati, consolidating and contributing ideas to
\nanticipate and prepare for the general election. For the time
\nbeing I also pay attention to economic and political affairs and
\ntry to find a resolution to the internal conflict within the PDI.<\/p>\n
Q: What are your concerns now?<\/p>\n
L: I studied engineering to participate directly in development
\nactivities in Indonesia. Then, all of a sudden, there were no
\nprojects in the early 1980s. I started to think that economists
\nplayed a very important role in making development projects
\npriorities, and engineers just followed the economists. I had to
\nmove on to economy and finance. I studied these subjects when I
\nwas working at Citibank. Beginning as an executive trainee, I
\nstudied while working at Citibank until I was a managing
\ndirector. In the early 1990s, when the government imposed a
\ntight monetary policy, I realized that in Indonesia, politicians
\ndecided economic affairs. At that time, BI extended a credit
\nfacility to BPPC (the Clove Bufferstocking and Marketing Agency)
\nwhich should not have been funded. I started to think politics
\nwas very important. Rather than going to school, I joined PDI to
\nstudy politics. I chose PDI because I felt I could not learn
\nabout politics by joining Golkar. After joining PDI, I was
\ndiscriminated against by the government and people were
\napprehensive about meeting with me. Since the crisis the
\nsituation has changed.<\/p>\n
Q: What is your ambition?<\/p>\n
L: I am a very simple person. I want to see Indonesia become a
\nsuper-power country. The people are the assets of the country,
\nnot the liabilities. Human capital is the key to the development
\nof countries. I believe Indonesia has great potential. To be an
\nasset, a human being must be creative. Creativity leads to
\ninnovation and innovation creates products. Human beings can only
\nbe creative when they are given independence in thinking and
\nfreedom of expression. This is a very basic need. To acquire
\nhuman capital, again, we need the basics: An independent
\njudiciary system and the empowerment of democracy. With a
\npopulation of some 200 million people, Indonesia has an excellent
\ndomestic market. The education system must be reviewed.<\/p>\n
Q: How long do you work daily?<\/p>\n
L: Starting from breakfast, I begin my work by meeting with
\npeople. This lasts until midnight.<\/p>\n
Q: How do you have time for your family?<\/p>\n
L: Sometimes I still have time for the family. My children often
\ncomplain and say: \"Why did you go into politics and sacrifice
\nyour family?\" I tell them that we have to be an asset to our
\ncountry. (icn)<\/p>",
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