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.