Scandal may delay sale of BNI<\/p>\n
Associated Press, Indonesia<\/p>\n
The Indonesian government will probably delay a sale of its
\nstake in the nation's second-largest state bank following the
\nrecent revelation of alleged lending fraud, a Cabinet minister
\nsaid on Saturday.<\/p>\n
The government planned to sell some of its 98 percent stake in
\nBank Negara Indonesia (BNI) in the first quarter of next year.<\/p>\n
\"We are not going to do that if we are not ready. Who will buy
\nthe shares?\" Minister of State Enterprises Affairs Laksamana
\nSukardi said on the sidelines of a business conference on the
\nIndonesian Island of Bali.<\/p>\n
The scandal allegedly involved the issue of approximately
\nUS$200 million in letters of credit by institutions in Kenya,
\nSwitzerland and the Cook Islands to cover exports by Jakarta-
\nbased companies.<\/p>\n
A Jakarta branch of BNI issued export credits to the
\ncompanies, but they never made the exports, police said.<\/p>\n
Bank Negara Indonesia acknowledged in October that it could
\nlose up to half its forecast profits this year because of the
\nscandal.<\/p>\n
The government will reshuffle BNI's top management Dec. 15,
\nalthough it is still unclear who will be sacked. Laksamana said
\nsome BNI directors recently tendered their resignations, but the
\ngovernment would decide later whether to accept them.<\/p>\n
Indonesia has sold stakes in several state-owned companies
\nfollowing the 1997-98 Asian financial crisis to help finance its
\nbudget deficits.<\/p>\n
This past week, the fourth-largest state-run, Bank Rakyat
\nIndonesia, announced that it faces potential losses of Rp 294
\nbillion ($35 million) because three of its branches provided
\ncredits backed by fictitious deposits in the bank.<\/p>\n
The scandals highlight the weakness of internal control
\nmechanisms in state banks, where corruption remains a problem.<\/p>\n
\"The state-owned enterprises are such a rampant breeding
\nground for corruption,\" Laksamana said.<\/p>\n
He said selling stakes in state companies to private investors
\nis one of the most effective ways to tackle corruption.<\/p>\n
\"Once there's substantial private ownership of the (state-
\nowned) enterprises, the new management will be less tolerant of
\nhaving their revenues skimmed or squeezed,\" Laksamana said.<\/p>",
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