A license to pillage

A license to pillage

The revelation of Texmaco's huge bad debts, which totaled
almost US$1.3 billion to state Bank BNI, is surely just the tip
of the iceberg of accumulated excesses resulting from the abuse
of political power under the 32-year authoritarian rule of former
president Soeharto, who surprisingly remains legally clean. It is
a classic example of Soeharto's patronage system, through which
he dispensed favors and licenses to break laws and rules to
pillage the nation.

The case serves only to substantiate what has for a long time
been public knowledge within the country and overseas, but which
was, until recently, successfully covered up to remain above the
reach of the law. Major cracks only appeared in the system once
the corrupt, collusive and nepotistic (KKN) empire was exposed,
following the fall in May 1998 of its patron (Soeharto), and the
ousting in October 1999 of his protege, B.J. Habibie.

Last week's announcement by the Indonesian Bank Restructuring
Agency that it would probably recover only about 4 percent of the
Rp 267 trillion ($38 billion) in bad credits from state banks
confirmed the extent of the damage and how Soeharto's family
members and cronies had blatantly robbed the state banks and left
them high and dry. These banks now need more than Rp 255 trillion
in recapitalization funds.

It is a pity that Marimutu Sinivasan -- a savvy entrepreneur
who started his textile business in the 1950s -- has become
entangled in the Soeharto KKN web. His core business -- textiles,
synthetic fibers, garments, textile machinery and machine tools
-- is well suited to the needs of a developing economy such as
Indonesia.

Sinivasan's international credit rating had been fairly high.
But problems started cropping up when his Texmaco Group rapidly
embarked on massive expansion and diversification into steel,
trucks and car parts. Sinivasan may have been overly naive not to
realize that all large-scale business in Indonesia then had to
pass through the Soeharto patronage system. The system controlled
the central bank, state banks and the entire business licensing
system.

The documents chronicling the KKN process of the Texmaco loan
application, as leaked to the mass media early this week,
disclosed how Sinivasan's ambitious investment expansion led him
to a severe financial crisis. The huge devaluation in the rupiah
steeply raised Indonesia's country premium risks, consequently
shutting down Texmaco's access to the international debt market
and forcing Sinivasan to ask for favors from the Soeharto KKN
club. Now he must face the law.

The documents also revealed how a memo from Soeharto acted as
an authoritative license for bank directors and the central bank
governor to break laws and rules without any fear that they would
eventually have to account for their actions.

What makes a mockery of any sense of justice in the case was
the effortlessness of the multimillion dollar loans at a time
when the rupiah was under great pressure and the nation had to
kneel before the International Monetary Fund to obtain emergency
foreign exchange reserves.

We hope the great fanfare in which the Texmaco case was
revealed will not be relegated and forgotten like so many other
instances of abuse uncovered under the Soeharto and Habibie
administrations.

There are disappointing precursors: consider for instance the
corruption cases against Soeharto's youngest son Hutomo Mandala
"Tommy" Putra and Beddu Amang, former chief of the National
Logistics Agency. Both cases were thrown out of court. The Timor
car project, the multibillion dollar clove monopoly, the
multimillion dollar Balongan refinery fraud -- all of which were
outright KKN businesses from the outset -- are only a few of many
big KKN cases that remain untouched by the law.

Good governance has been proclaimed by President Abdurrahman
Wahid to be one of the top priorities of his administration, so
Attorney General Marzuki Darusman should go all-out to expose the
mountain of past KKN practices. Only then will it be proved to
the people and the international community that Indonesia is
determined to root out corrupt practices from its bureaucracy and
business world.

The task is obviously an uphill one; one Marzuki cannot change
the system overnight, and hundreds of big KKN cases are waiting
to be unraveled. To face the daunting task, Marzuki must
establish working priorities. He should first establish a core
team of highly competent and honest prosecutors, assisted by
financial experts. He should assign the prosecutors to zero in on
several high-profile instances of KKN to send a warning to
officials and the business community that from now on they must
eradicate the culture of corruption from their activities.

However, the risks of a new KKN empire arising remain great as
long as ministers and officials are not subject to higher
standards of accountability but can instead hide behind the
President's power, as those under Soeharto did. Marzuki should
tightly shut this escape route by forcing sycophant officials,
cabinet ministers and all other assistants to the President to
account for their acts before the law.