'BNI case further hurts investor confidence'

'BNI case further hurts investor confidence'

Dadan Wijaksana, The Jakarta Post, Jakarta

The recent disclosure of a fraud case at Bank Negara Indonesia
(BNI) will further increase investment and business risks in the
country, analysts say.

Senior legislator Paskah Suzetta said over the weekend the BNI
saga would not only shatter public confidence in the banking
sector, but would also put at risk the economic credibility in
the eyes of international investors.

"The BNI case will negatively affect the overall economy. It
will increase investment risks in the country, further dampen the
country's business competitiveness as the case clearly indicates
corruption and collusion," Paskah said on the sidelines of a
discussion here.

"In addition, the case will also have a negative impact on the
state budget, as the government expected to gain revenue from
state-owned companies, including BNI, to supplement the budget.

"With the potentially huge loss resulting from the case, I
don't think BNI will be able to contribute to the budget as
scheduled," Paskah added.

Paskah was commenting on the highly publicized scandal at the
publicly listed BNI, which centers on its failure to conduct a
proper credit appraisal before allowing its Kebayoran Baru,
Jakarta, branch to disburse export loans to a number of local
businessmen, who claimed to be exporting commodities to Congo and
Kenya.

The companies used as collateral letters of credit (L/Cs)
guaranteed by banks in Kenya, Switzerland and the Cook Islands.
BNI provided the exporters credit totaling Rp 1.7 trillion from
December 2002 to July 2003.

It was later discovered that the businessmen never exported
the commodities.

Analysts have said the bank should have sensed something was
amiss from the very start, as the foreign banks that guaranteed
the letters of credit were not listed as BNI correspondent banks.

BNI president Saifuddien Hasan said last week that the debtors
had tampered with documents and had colluded with BNI officials
to obtain the loans.

Paskah said the remarks confirmed that corrupt practices had
not only pervaded the country's bureaucracy, but also the private
sector.

Suryo B Sulistyo, an executive of the Indonesian Chamber of
Commerce and Industry (Kadin), shared the view that the case
would further deteriorate investors' appetite to come and invest
in the country.

Suryo said the case showed that the country was not serious in
fighting corruption.

"While other countries are intensifying campaigns against
corruption to improve their business competitiveness, what we
have here is another case of fraud," he said, referring to the
BNI case.

In its latest report released last week, Geneva-based World
Economic Forum listed Indonesia 60th (out of 102 countries
surveyed) in terms of business competitiveness. In comparison,
neighboring Malaysia ranked 26, Singapore 8, Thailand 32, while
Vietnam was 50th.

Rampant corruption and an ineffective bureaucracy are the two
most important factors behind the country's low business
competitiveness index, according to the WEF.

Analysts have said weak investment activities in the country
and slow export performance had been linked to the above
problems. They said that pushing investments and exports were key
to a stronger economic growth needed to create more jobs for the
millions of unemployed.