Bank Bali scandal serves as a lesson for the government

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.