Bank Bali scandal serves as a lesson for the government

By Aleksius Jemadu

BANDUNG (JP): What is the difference between Arnold A. Baramuli, the current head of the Supreme Advisory Council (DPA), and businessman Eddy Tanzil?

When the latter was accused of misusing trillions of rupiah of public money, he was jailed but then fled the country. When Baramuli was accused of being involved in essentially the same legal case by members of the legislature, he confidently raised his head in front of television cameras as if he wanted to declare: "Baramuli can do no wrong". If true, then it is good news. If not, it will be a national disaster.

The contentious issue in the Bank Bali scandal is the transfer of Rp 546 billion to politically well-connected PT Era Giat Prima (EGP) as a commission fee for helping the bank recoup interbank loans from a closed institution.

Since all loans are guaranteed by the Indonesian Bank Restructuring Agency (IBRA), Bank Bali should not have had to use the service of a third party.

An investigation conducted by the House of Representatives special team indicated that Baramuli was involved in the scandal. He is suspected to have had an active role in pushing through the Bank Bali/EGP transaction. This allegation is based on the testimonies of various parties, including former Bank Bali president Rudy Ramli, Minister of Finance Bambang Subianto and IBRA chairman Glenn Yusuf.

Many people have also wondered why Bank Indonesia did not allow PricewaterhouseCoopers (PwC) to audit all the bank accounts related to the scandal. Moreover, PwC was not allowed to disclose the complete version of its audit to the House commission on the grounds that it would violate banking secrecy codes and its contract with the Supreme Audit Agency (BPK). People now wonder if there is a high level conspiracy to mask this scandal.

Whether or not there is a conspiracy, it is an undeniable fact that bank restructuring is at the heart of an economic recovery in Indonesia. Too much financial liberalization in the past was believed to be behind the collapse of the Indonesian banking industry.

However, the implementation of bank restructuring under the coordination of IBRA cannot be perceived as merely a mechanical translation of goals into routine procedures.

We need to take into account fundamental questions about conflicts of interest, decision-making deviations and the distributions of costs and benefits among major policy stakeholders. For instance, to what extent have the officials of IBRA done their job in a professional and accountable manner? Are they politically neutral? Can they resist outside pressure imposed by ambitious politicians within the incumbent government?

There are some important lessons the Indonesian government should learn from the Bank Bali scandal. First, the restructuring of the Indonesian banking industry involves the management of a huge amount of assets taken over by the state from troubled banks. Those who are entrusted with this job should be free from outside political pressure and have a strong sense of public responsibility.

Second, the success of the International Monetary Fund's (IMF) cure in solving the economic crisis is not only determined by a completion of the scheduled lending commitment but also by the professionalism and sense of public accountability of Indonesian government officials.

Third, we cannot rule out the possibility of a cover-up in the scandal in order to protect some high government officials. There is a strong indication of the manipulation of public ignorance of the complexity of banking business. Therefore, on behalf of the Indonesian public, the media should continue to pressurize those who were involved in the scandal until justice is done.

Last but not least, it is high time for Indonesia to have a strict regulation to kick big money out of politics. Like the United States, Indonesia does need a special law to regulate and limit campaign contributions so that a healthy competition among political parties or presidential candidates can be expected. Many government officials, including those who are allegedly involved in the Bank Bali scandal, regard themselves as genuine reformists. But what is the use of reform if the reformists today will be the liars of tomorrow?

Aleksius Jemadu Ph.D. teaches international political economy at the School of International Relations at the Parahyangan Catholic University, Bandung.