WB threatens to withhold aid<\/p>\n
JAKARTA (JP): The World Bank threatened on Tuesday to halt
\nfunding for Indonesia if the investigation into the Bank Bali
\nscandal was not concluded swiftly and satisfactorily.<\/p>\n
World Bank country director for Indonesia Mark Baird said that
\ngiven the magnitude of the case, it was not enough for the World
\nBank to simply express concern over the alleged fraud.<\/p>\n
\"If this case is not resolved satisfactorily, it will be
\ndifficult for us to provide budgetary support to the government
\nof Indonesia,\" he said on the sidelines of a seminar on the
\ncapital market.<\/p>\n
The administration of President B.J. Habibie has been under
\npressure to resolve the \"illegal\" transfer of Rp 546 billion
\n(almost US$80 million at current rates) from Bank Bali to PT Era
\nGiat Prima (EGP), a private company linked to several of
\nHabibie's associates.<\/p>\n
Several ministers and Habibie's younger brother are also
\nalleged to be involved in the scandal.<\/p>\n
Although the money has been returned to Bank Bali, there are
\nstill demands that all those involved in the scandal be legally
\nprocessed because a crime may have been committed.<\/p>\n
The International Monetary Fund (IMF) earlier called on the
\ngovernment to allow Australia-based PricewaterhouseCoopers to
\naudit Bank Indonesia in an attempt to trace the flow of the funds
\nfrom Bank Bali, in an effort to identify those involved in the
\ncase.<\/p>\n
The government earlier appointed PricewaterhouseCoopers to
\naudit the Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
Although government and central bank officials welcomed the
\nIMF's proposal, Bank Indonesia Governor Sjahril Sabirin said on
\nTuesday that according to the new Central Bank Law, only the
\nSupreme Audit Agency (BPK) had the right to audit the central
\nbank.<\/p>\n
Sjahril said PricewaterhouseCoopers could audit the central
\nbank only with the prior consent of BPK, or if the House of
\nRepresentatives demanded that BPK seek the assistance of an
\nindependent auditor.<\/p>\n
Sjahril was speaking to reporters before meeting with Habibie
\nat the State Palace.<\/p>\n
BPK is chaired by Satrio B. Yudono, another Habibie loyalist.<\/p>\n
However, Sjahril said after the meeting it was best if BPK
\ninvolved Pricewaterhousecoopers in the auditing process.<\/p>\n
Major opposition political parties warned the public on Monday
\nto be on guard for a possible compromise agreement between the
\nHouse and the government to settle the high-profile scandal.<\/p>\n
World Bank vice president for East Asia and the Pacific Jean-
\nMichel Severino said in a speech at an international capital
\nmarket conference that the World Bank remained deeply concerned
\nover the Bank Bali affair and its broader implications for
\nIndonesia's bank restructuring efforts.<\/p>\n
\"I welcome the preliminary steps taken thus far, including the
\nreturn of the funds and the initiation of an independent audit.
\nBut I urge that the process be completed as quickly and
\ntransparently as possible, that details of the case be explained
\nto the public and that any wrongdoers be subject to the full
\nforce of the law.<\/p>\n
\"This matter needs to be resolved, not only because of the
\nlarge sums of money involved, but also because of the greater
\nconfidence and credibility issues at stake,\" Severino said.<\/p>\n
Severino and IMF Asia Pacific director Hubert Neiss, who
\narrived in Jakarta late on Tuesday, are expected to meet with the
\ngovernment on Wednesday to push for a satisfactory resolution of
\nthe Bank Bali case.<\/p>\n
The scandal has threatened the credibility of the government's
\nbank restructuring program by damaging confidence in banking
\nauthorities and the banking community.<\/p>\n
Bank Bali should not have used EGP to recoup its interbank
\nclaims because the claims were assured by IBRA through the
\ngovernment's blanket guarantee program.<\/p>\n
There is suspicion among legislators that Minister of Finance
\nBambang Subianto and IBRA chairman Glenn S. Yusuf played a role
\nin forcing Bank Bali to pay EGP the commission for helping the
\nbank recoup its interbank claims on liquidated Bank Dagang Negara
\nIndonesia (BDNI).<\/p>\n
Many analysts and political leaders, including those from the
\npopular Indonesian Democratic Party of Struggle (PDI Perjuangan),
\nhave accused ministers and members of Habibie's inner circle,
\nincluding his brother, of being involved in the case which has
\nnow become a political scandal.<\/p>\n
The Habibie loyalists have been accused of seeking to raise
\nmoney to secure Habibie's victory in the November presidential
\nelection.<\/p>\n
Publicly listed Bank Bali is currently under the management of
\nU.K.-based Standard Chartered Bank, which has committed to buy a
\n20 percent stake in Bank Bali in October through a rights issue.
\nThe government will be the standby purchaser of the remaining 80
\npercent stake in a bid to recapitalize the bank.<\/p>\n
Meanwhile, Jakarta Stock Exchange president Mas Achmad Daniri
\ndismissed on Tuesday rumors that the suspension of trading of
\nBank Bali shares would eventually lead to the bank's delisting
\nfrom the exchange.<\/p>\n
Trading on Bank Bali has been suspended since the scandal
\nbroke two weeks ago.<\/p>\n
Daniri said trading of Bank Bali shares would resume once the
\ncase was resolved.<\/p>\n
In a related development, IBRA deputy chairman Pande Lubis,
\nwho is suspected of involvement in the Bank Bali scandal, snapped
\nat photographers who were attempting to take his picture on
\nTuesday.<\/p>\n
\"This is the only way for you to earn a living,\" he asked
\nphotographers after answering questions at National Police
\nHeadquarters. (rei\/udi\/ylt\/prb)<\/p>",
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