Auditing Bank Indonesia

For the first time since the central bank became an autonomous monetary authority in mid-May by virtue of Law No. 23/1999 on Bank Indonesia, the institution may have to surrender itself to a special audit by another independent organization, PricewaterhouseCoopers, one of the world's seven largest accountancy firms. Though the scope of the audit will be limited to the questionable transfer of Rp 546 billion (almost US$80 million) from Bank Bali in early June to companies and businessmen associated with the ruling Golkar Party, the special audit assignment, demanded by the International Monetary Fund, is another blow to the integrity and independence of Indonesian auditors and bank supervisors.

The audit of Bank Indonesia by a foreign accountancy firm will indeed be an extraordinary case, because the central bank law stipulates that Bank Indonesia's annual financial reports shall be audited only by the Supreme Audit Agency. Any special audit of the central bank can be made only at the request of the House of Representatives. But then the Bank Bali scandal is not an ordinary case, because of the suspected implication of powerful businessmen, Cabinet ministers and top politicians in what has been termed "Baligate". Yet more devastating to political and social stability is the fact that the scandal is threatening not only the $75 billion bank restructuring program but also the country's economic reform program as a whole.

Foreign governments, institutions, creditors and the international community in general have every reason to doubt the political will of the Habibie government in dealing firmly and speedily with malfeasance. In spite of the nationwide reform movement and the emergence of whistle blowers within the government and business community, as well as more aggressive media investigative reports, little has changed in the country's old entrenched system of bureaucratic and political corruption.

The abrupt discontinuation last month of investigations into corruption allegations against former attorney general Andi M. Ghalib was further evidence of the half-hearted manner in which the government went after corrupt officials. President B.J. Habibie's foot dragging with regard to the issuance of a permit to the National Police to question Setya Novanto, a member of the People's Consultative Assembly, and one of the main suspects in the scandal, is an indication of a high-level conspiracy to protect certain people from the law.

The IMF's insistence that an independent international firm be assigned to audit the results of the Indonesian Bank Restructuring Agency's internal investigations, and that the scope of the probe be widened to include Bank Indonesia, should not be seen as foreign infringement on our internal affairs.

Such pressure is both logical and reasonable viewed from the interests of the IMF itself and the fate of Indonesia's economic reform. First of all, there are already signs of a high-level conspiracy to limit the scope of investigations and to reduce the weight and magnitude of the affair in order to protect top politicians, Cabinet ministers, senior officials as well as big businessmen implicated in the scandal. Moreover, the IMF, which is leading the $43 billion bailout of Indonesia's economy, has its reputation at stake, because failure to resolve the scandal in a transparent and highly accountable manner would kill the budding confidence in our crisis-hit economy and might waste the multi-billion dollar program. So devastating could be the impact of Baligate that the IMF has officially expressed great concern at least four times over the last two weeks.

A special audit of Bank Indonesia is essential to draw valuable lessons as to how the fraud could have taken place while Bank Bali was under special supervision by Bank Indonesia in connection with its recapitalization with government funds. An independent audit is crucial to trace the whole flow of the Rp 546 billion booty that was allegedly transferred to many top politicians, Cabinet ministers and businessmen.

If the government is really serious about resolving the economic crisis it should act firmly and speedily to allow a special audit of Bank Indonesia and to immediately announce fully its findings and prosecute any wrongdoers. Anything short of this measure will fail to restore confidence in the bank restructuring program and economic reform as a whole.