Business embroilment

Business embroilment

The government has finally admitted what businesspeople have
been concerned about: a likely backlash against the business
world in the stepped-up drive against corruption, collusion and
nepotism (KKN). Coordinating Minister for the Economy, Finance
and Industry Kwik Kian Gie told the House of Representatives on
Wednesday that the government, determined to build good
governance both in the public and private sectors, is facing a
dilemma.

Cracking down vigorously on KKN in the business world might
cripple economic activities as a great number of businesspeople
were, one way or another, implicated in those evils, which were
accepted as common business practice during the Soeharto and B.J.
Habibie administrations.

The great fanfare in which the Texmaco loan case was disclosed
and submitted to the Attorney General's Office last week
unintendedly caused a massive run on Bank Putera Multikarsa, a
unit of the Texmaco Group. The bank, suspended by Bank Indonesia
from clearing activities on Tuesday, might have to be taken over
and put under the Indonesian Bank Restructuring Agency (IBRA) at
the expense of taxpayers if the owners cannot come up with fresh
money to settle the negative balance. Under the new central bank
law, Bank Indonesia can no longer inject liquidity credits to the
banking industry. Liquidation or takeover of Bank Putera
Multikarsa would be another major setback to the bank
restructuring program, which is the key to economic recovery.

Several businessmen have complained about losing foreign
orders or the confidence of their creditors due to the fallout
from what they saw as disproportionately negative publicity based
on incomplete, immature or inaccurate remarks by officials or in
documents leaked to mass media.

However, the risk of shocking the business world obviously
cannot be used as an excuse to simply forgive all the past sins
of businesspeople and officials, or to be discriminative in
disclosing and prosecuting KKN cases.

Abdurrahman Wahid, elected to the presidency mostly on the
back of his integrity, is duty bound to act firmly, fairly and
consistently to crack down on KKN if he is really serious about
maintaining legitimacy and credibility, thus far the only assets
he can capitalize on in sustaining popular support for his
compromise, coalition Cabinet.

Investigating and prosecuting past KKN cases, instead of
hurting market sentiment, will actually strengthen investor
confidence in the economy because the drive will eventually
enhance good corporate governance. Moreover, political stability
without credible law enforcement means nothing to the business
sector.

The government can minimize the risk of unintentionally
damaging businesses if it pursues the anti-KKN drive through a
good balancing act: prosecuting businesspeople involved in KKN
practices but seeing to it that their businesses, if still
commercially viable, continue normal operations. After all, the
target of the campaign is not enterprises but the behavior of
businesspeople or business executives.

The anticorruption campaign should also distinguish bad debts
caused mainly by the economic crisis from those inflicted by a
combination of KKN and economic depression. Certainly not all of
the approximately 2,000 big debtors currently handled by IBRA
should be blamed on KKN. Quite a number of them were well-managed
enterprises which went under only because of the economic crisis.
In fact, very few major companies, even those oriented mainly to
the export market, could weather Indonesia's economic woes over
the past two years, when the rupiah's exchange rate collapsed to
as low as Rp 17,000 per U.S. dollar last year from Rp 3,000 in
late 1997, the interest rates skyrocketed to as high as 70
percent and the economy contracted by almost 14 percent.

The most important, yet most delicate, task now is how to
prevent measures taken within the anti-KKN drive from excesses
that could unintentionally create misleading, or confusing
information in the market. We all know that the market is highly
sensitive to information.

But a balancing act is not an easy exercise in this reform era
that demands high standards of transparency and public
accountability. Officials who refrain from making comments or
statements about major issues could be accused of cover-ups. Just
look at how officials have been under constant, almost daily,
pressure from reporters hunting for "hot, juicy" news. And bad
things such as scandals and KKN cases usually hot news that sells
newspapers.

The problem, though, is that premature remarks, incomplete or
disproportionate statements about businesspeople alleged or
rumored to be involved in KKN practices could mislead and confuse
the market or cause their businesses to lose market confidence.

It is imperative that officials, notably law-enforcement
officers, while acting firmly and fairly, should tread carefully
when investigating KKN cases, refraining from commenting on cases
still under investigation and not jumbling up KKN-implicated
entrepreneurs with the viability of their businesses.

However, the public will understand and accept such restraint,
and not misconstrue it for a cover-up, only if people are really
convinced that the government is truly serious and not
discriminative in cracking down on KKN. Gaining such public trust
and support requires the government to produce definitive
performances by successfully prosecuting several high-profile
cases, which have widely been perceived to be blatant corruption
and yet remain untouched by the law.