Mon, 07 Apr 2003

BLBI trials a cost of poor judiciary

Berni K. Moestafa, The Jakarta Post, Jakarta

The billions of dollars in misused Bank Indonesia liquidity support (BLBI) funds still missing despite the court trials of abusive bankers, highlights the cost of a judiciary ranked among the worst in the world.

Three former Bank Indonesia directors were sentenced last week to between two to three years in prison for mischannelling Rp 18.37 trillion of BLBI funds. The court ordered one of the convicted bankers to pay a fine of Rp 20 million, but none were ordered to return any part of the abused loans.

The verdicts were the latest in a series of similar attempts to recoup the Rp 138 trillion (US$ 15.5 billion) in BLBI funds bankers misused between 1997 and 1999.

The liquidity support was issued to help banks cope with mass runs against them during the height of the 1997-1998 financial crisis.

Of the total BLBI funds, around Rp 29.92 trillion have gone to trial under 17 separate cases, but the courts have ordered the return of only Rp 2.82 trillion from the 14 cases tried so far.

"It goes against our sense of justice," said National Law Commission secretary Frans Hendra Winarta on Sunday.

Corruption carries a maximum sentence of life in prison, but prosecutors have refrained from demanding the full penalty, except for those bankers who remain at large and were tried in absentia.

Hendra saw no reason for the court to be lenient, considering the amount of money bankers had siphoned and the consequent devastating impact on the country's budget.

The government raised funds for the BLBI using bonds for which it must now allocate trillions of rupiah every year to repay principles and interest rates, toward which Rp 55 billion is scheduled to be paid this fiscal year.

To finance the bonds, the government had to slash spending on subsidies and development programs under an austerity drive that has mostly hurt the poor.

"Why, then, have prosecutors demanded lenient sentences which the judges have further reduced," asked Hendra. He suspected bribery.

A report by the Indonesian Corruption Watch (ICW) last year showed that corruption was endemic at Indonesian courts. It said bribery ran through the entire rank of the judiciary, from the police, prosecutors, courts and on up to the Supreme Court.

The report came within days after a visiting United Nations legal expert counted Indonesia's judiciary among the worst he had ever seen worldwide.

Besides the BLBI cases, the government is also pressing bankers to repay around $10 billion of loans they admitted to having abused during the financial crisis.

In a bid to avoid legal charges, the debtors agreed on debt settlement schemes that allowed for a gradual repayment. Until now, payment has been minimal and critics now demand the debtors be brought to court.

With the poor showing in the BLBI cases, however, Hendra warned that legal charges may look less frightening now to recalcitrant debtors.

"A court settlement should always be the last resort ... but once taken, judges must be able to hand down stern verdicts," he said.