All the President's men simply buy time

All the President's men simply buy time

With the Bank Bali scandal still unresolved despite the
lengthy amount of time which has passed since it broke publicly,
there is scant trust remaining in the government's sincerity in
settling the case. Economist Tony A. Prasetyantono of Gadjah Mada
University discussed the issue with The Jakarta Post.

Question: How do you perceive the government's handling of the
Bank Bali scandal?

Answer: I see it as nothing but the people involved trying to buy
time while waiting for a new scandal which will make the people
forget this one. After all, a case will eventually be forgotten
once another case emerges. The case of (former attorney general)
Andi M. Ghalib is an example.

All of the president's men involved in the case are simply
buying time. This can clearly be seen by how (chairman of the
supreme advisory board) A.A. Baramuli is trying to shift
attention from the real case by calling on people to destroy Kwik
Kian Gie (of the Indonesian Democratic Party of Struggle). He is
trying to shift the case from one of conspiracy to a dispute
between political parties.

Q: Some people have said that the amount of money involved in the
scandal is nothing compared to the money currently being managed
by the Indonesian Bank Restructuring Agency (IBRA). Your comment?

A: It's true the Rp 564 billion is nothing compared to the some
Rp 600 trillion managed by IBRA. But the scandal could snowball,
which could disrupt the country's economic recovery.

First, it would make the government's bank recapitalization
program more difficult to carry out. There would be difficulty
deciding how much funds were required because the amount would
constantly change, depending on the leaks in the banks to be
recapitalized.

The Rp 564 billion leak in Bank Bali results in more
recapitalization funds being required. Pradjoto (a banking law
expert) has said 11 other banks have problems similar to Bank
Bali's.

So the more problematic banks there are, the more funds needed
for recapitalization. Remember, 80 percent of the
recapitalization money is being raised through the issuance of
government bonds, and the government has to pay Rp 35 trillion in
interest on these bonds. In short, no matter how little a bank's
leak, it will directly affect the national budget... and it is
the people who bear the cost.

The second impact is the resulting threats from the
International Monetary Fund and the World Bank. They are not
playing around; their threats are serious. How can they disburse
aid with no guarantee it won't be abused? Surely they aren't
going to give loans to a country which has no credibility.

Q: Would these agencies follow through on their threats to stop
the disbursement of aid to the country, realizing this would make
it impossible for Indonesia to repay its loans?

A: Not repaying our loans would backfire; the international
community could treat us like Iraq and impose embargoes on us.

We now get some US$8 million a month in loans, and with the
rescheduling (by the agencies) it's now half that amount.

Canceling the aid would make the wheels of economy stop.
Thirty percent of the national budget comes from overseas loans.
Projects would be abandoned, the welfare of civil servants would
be affected and the effects would multiply.

Aid from the IMF contributes significantly to our foreign
exchange reserves and in securing the balance of payment.

A cancellation of IMF aid would therefore affect the value of
the rupiah, which has now weakened beyond reasonable explanation.
It should be higher now because the U.S. dollar is weakening
against the Japanese yen.

Based on an analysis of the economy, Rp 10,000 against the
U.S. dollar does not make sense.

But this happened because the scandal has not been handled
properly. In other words, the sky's the limit for the rupiah's
value against the U.S. dollar.

This implies that the Bank Bali scandal, along with the East
Timor situation, is really giving investors a negative perception
and sentiment toward the market. Not only should we look into the
amount of the leak, but also the essence of the problem and its
impact, especially on the country's credibility.

Q: How long would it be before we felt the impact of a
cancellation of international loans?

A: Logically it would be in one or two months. Presently we have
a reserve fund of $16 billion. Without loans from the IMF, this
would clearly decrease within the next two months.

Q: Is it the Bank Bali scandal or East Timor which is most
directly affecting the economy?

A: For now it's the bank scandal which has more influence. The
IMF has clearly said that the scandal is a critical point in
considering further assistance to restore our economy. East Timor
so far has only resulted in political sanctions.

Q: What should President B.J. Habibie do about the bank scandal?

A: Statements alone are not enough; he should show his sincerity.
The scandal is a test case to see whether Habibie has the guts to
perform a "political amputation". The first step could be making
Baramuli step down as DPA chairman. Otherwise, people will think
that Habibie may in one way or another be involved in the
scandal. (swa)