Boediono dashes hopes for justice in huge BI fraud case

Boediono dashes hopes for justice in huge BI fraud case

Dadan Wijaksana, The Jakarta Post, Jakarta

Finance Minister Boediono stressed on Wednesday that the plan to
appoint an independent consultant to audit the controversial Bank
Indonesia (BI) emergency loan debacle was not meant as a new
investigation measure into the alleged massive loan abuse.

Boediono said that the independent audit would be more focused
to calculate the burden the government and the central bank each
must bear.

"The aim of the appointment (of the independent auditor) is
more to determine the proportion of burden sharing between the
government and the central bank," he said on Wednesday, adding
that the government preferred a foreign auditor for the job.

Boediono's statement seemed to dash earlier hopes for the
resumption of a thorough independent investigation into what
might be the country's largest corruption case ever.

As reported earlier, a BI senior official indicated that the
International Monetary Fund (IMF) and the government had agreed
to appoint an independent consultant to investigate the suspected
misuse of the central bank's emergency liquidity support loan
program worth a staggering Rp 144.5 trillion (some US$14 billion)
disbursed during the peak of the 1997 regional financial crisis.

The move had sparked a glimmer of hope that the government
would get serious about a new investigation, after earlier audits
by the government's Supreme Audit Agency (BPK) and a probe by a
special team of the House of Representatives failed to deliver
justice.

According to last year's BPK audit report, some Rp 138.4
trillion of the liquidity support program had been misused.
While the loans were only intended to be channeled to banks
facing massive cash losses, some banks instead used the money to
speculate on currency, acquire fixed assets or rechannel them
into the interbank market.

The BPK also put the blame for the losses on the central bank.

Of the Rp 138 trillion in misused loans, some Rp 100 trillion
went to a small number of banks owned by powerful businessmen
believed to be very close to former president Soeharto.

BPK also said that none of the banks had paid back the money,
leaving taxpayers to bear the cost.

The BPK report of fund manipulation, prompted the government
to decide not to cover the emergency loans, pushing BI to the
brink of bankruptcy.

It was only after intense lobbying by several members of the
BI board of governors who threatened to resign, that the
government finally agreed to ease the central bank burden by
requiring them to cover only Rp 24.5 trillion of the loans, the
maximum limit BI could bear to avoid bankruptcy.

The government issued bonds to cover the loan, which means
that taxpayers would shoulder the cost.

However, none of those responsible for the huge losses were
put behind bars.

Top officials at BI have denied responsibility, arguing that
the loan program aimed at preventing a collapse in the domestic
banking system was not BI policy, but was ordered by the last
Cabinet of the Soeharto regime. Most of the loans abused were
dispersed before BI became an independent central bank in May
1999.

Among the top officials involved in the decision-making
process at the time included former chief economics minister
Ginandjar Kartasasmita and former BI governor Soedradjat
Djiwandono.

Meanwhile, economist Pande Radja Silalahi called for a clear
job description for the would-be auditor so that they can carry
out their duties properly.

"It should be clarified as to what will be their main tasks,
because if they fail to come up with an expected solution, it
will eventually harm the government's image," he told The Jakarta
Post.

But, he also warned the people not to expect too much from the
move, saying: "One thing we must keep in mind is the IMF itself
should be considered one of the actors in this case, as the loans
were disbursed while BI was under the Fund's direct supervision."

Meanwhile, Bustanul Arifin of the Institute for Development of
Economics and Finance (Indef) said that the limited terms of
reference given to any consultant was expected.

"I think the main purpose of an independent consultant, apart
from the calculation matters, is to find out whether the
emergency loans actually coincided with efforts to improve the
performance of the country's banking sector," Bustanul told the
Post.

"If the auditor is tasked to bring those responsible for the
abused loans to justice, it would be way out of IMF's
jurisdiction."

Launching a new investigation on the possible misuse of the
loans, Bustanul added, would undermine the BPK as a credible
agency, as it had already revealed its findings last year.