Combating the corrupt elite

Combating the corrupt elite

By Teten Masuki

JAKARTA (JP): The hurly-burly of the student-led movement
against collusion, corruption and nepotism seems to have been
sidelined.

Now topping the nation's agenda is the establishment of new
political parties, the amendment of laws on general elections and
political parties and the distribution of essential foodstuffs.

The Habibie government appears to be unwilling to investigate
the allegedly ill-gotten wealth of former president Soeharto, his
family and his cronies.

Logically, Habibie should prioritize this move to prove that
he and his government are not Soeharto derivatives. He should at
the same time inculcate a clean and democratic spirit into the
economy to strengthen his political legitimacy in the eyes of the
country and the world at large.

But this is not likely to happen because Habibie's Cabinet is
riddled with corruption, collusion and nepotism. It is public
knowledge that the Habibie family runs the Timsco Group, which
has more than 80 companies under its aegis.

The group's rapid growth was due to privileges extended by the
state agencies under Habibie's control when he was state minister
of research and technology and chairman of the Agency for the
Assessment and Application of Technology.

The family of Ginandjar Kartasasmita, the Coordinating
Minister for Economy, Finance and Industry, owns the Catur Yasa
Group, while Coordinating Minister for Development Supervision
Hartarto owns the Garama Group, which has similar business
interests to the Timsco Group. The Armed Forces (ABRI) also has
big business interests.

There seems to be great concern that once this information is
made public, it will jeopardize Habibie's authority.

Seen in this light, it is not surprising that Habibie
dismissed Attorney General Soejono Atmonegoro after he pledged to
investigate the wealth of Soeharto's family and cronies. Soejono
wanted to establish a team to investigate corruption which
involved members of the general public and he proposed turning
the Attorney General's Office into an independent agency.

Unfortunately, Soejono's plans will be hatched by his
successor, Lt. Gen. Andi Muhamad Ghalib. It is not clear whether
this has something to do with a pledge to protect Soeharto's
dignity and good name made by Ghalib's former boss, ABRI
Commander General Wiranto.

The pledge, which was made shortly after Soeharto's fall from
grace in May, did not explicitly suggest that efforts to
investigate the wealth of Soeharto and his family would be
halted.

The compromised efforts to fight corruption made by the new
Attorney General have been met with skepticism, particularly over
their ability to investigate the Soeharto family's foundations.
Some even doubt the seriousness of the Attorney General's Office.

Apart from the sudden replacement of Soejono, the
investigation has not been conducted transparently and doubt has
therefore been cast on its independence.

Furthermore, the investigation is only searching for evidence
of accounting fraud and is ignoring the issue of abuse of power,
even though it is widely known that the political elite, the
bureaucracy and big business were guilty of gross misuse of power
in addition to numerous white collar crimes.

The public is also aware of the judiciary "mafia" which
interferes with court decisions and is therefore afraid the
investigation will simply serve to launder money stashed away
inside the foundations by rubber stamping its legitimacy.

On the issue of corruption, the investigation has so far
focused only on Soeharto and his family. Some say that their
wealth is disproportionate since the former president's monthly
salary was only Rp 10 million.

The Indonesian Business Data Center estimates that the
Soeharto family controls total assets worth over Rp 300 trillion
(US$30 billion). The assets include more than 1,000 companies in
nearly all sectors of the economy, 105 foundations, and a number
of private properties.

The exact value of the family's overseas assets, including
bank deposits and funds in non-bank institutions (trust funds),
is not known. Forbes magazine reported that between 1986 and 1989
Soeharto's deposits amounted to US$16 billion. They may have
grown since then. Recent reports alleged that an $8 billion
deposit placed in an Austrian bank may have belonged to Soeharto.
The former president has denied these reports.

It is sad that Soeharto has steadfastly refused to explain the
origins of his wealth in public, especially since in his
autobiography he claims not to have come from a wealthy family.

The findings of the Indonesian Corruption Watch (ICW) suggest
that corruption involving ministers, politicians, the
bureaucracy, business tycoons and the Soeharto family can be
placed in one of two categories -- corruption in a legal way
supported by the official state policies; and corruption by way
of accountancy through marking-up projects and credit.

The misuse of state funds can take many forms in this sort of
environment.

First, state-owned enterprises can be forced to cooperate in
joint ventures with certain foundations or crony companies. The
companies then enjoy a monopoly in the production, distribution,
trade and development of projects at marked-up prices.

Second, state-owned enterprises are obliged by presidential
decree to channel their profits into particular foundations.

Third, state-owned companies are coerced by unofficial letters
and telephone calls to deposit funds in a bank. The funds are
then advanced as credit at special interest rates to certain
companies.

Fourth, state-owned companies are compelled to buy shares in
certain companies, despite the fact that they are financially
unsound.

Fifth, through presidential decrees, certain companies win
exemptions on income tax, export-import duty and get government
funds at very low interest rates.

Under this scheme, certain companies owned by members of the
elite have developed into big business groups and expanded into
all sectors of the economy at home and abroad. Do not be
surprised to see that many young businessmen already control
scores of large companies.

Since there are political obstacles to investigating
corruption, especially corruption among the elite, it has been
proposed that the establishment of an independent and autonomous
body to investigate the wealth of state officials should be put
on the agenda for the special session of the People's
Consultative Assembly (MPR) in November.

The body must be given full authority to investigate
government officials and businessmen who are suspected of being
corrupt. The body would not be necessary if the existing legal
institutions like the Attorney General's Office could work
independently.

We have to remember that the investigation and restitution of
the state's wealth must be done carefully. It must not further
damage business activities. If it does, tax revenues will fall
and unemployment will rise.

The writer is the coordinator of the Indonesian Corruption
Watch working committee.