Auditing Bank Indonesia
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.
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.