Government defends closure of bad banks

JAKARTA (JP): The government yesterday strongly asserted the correctness and legality of its decision to close 16 insolvent banks, and said it would not alter the decision despite the objections and legal challenges by several affected bankers.

"The government has considered all aspects of the 16 bank closures and the decision was taken for the common good of the nation," Minister/State Secretary Moerdiono stated yesterday.

Moerdiono made the statement when asked by reporters about the government's view of the litigation filed by some bankers at the Jakarta Administrative Court against the closure of their banks.

Asked whether the government would stand by its decision and not rescind its closure of Bank Andromeda and Bank Jakarta, Moerdiono said: "I thank you for that question. But I hereby reaffirm that the closure of those banks remains legally effective."

He conceded that every citizen, including the bankers, has the right to go to the State Administrative Court to ask for a redress of a government ruling which is seen as unfair.

"I myself and even the President himself have in the past been sued through the State Administrative Court," Moerdiono said, adding that the court had been set up precisely to handle such matters.

President Soeharto's second son Bambang Trihatmodjo and other shareholders of Bank Andromeda lodged a lawsuit against Finance Minister Mar'ie Muhammad and Bank Indonesia's Governor J. Soedradjad Djiwandono through the Jakarta Administrative Court Wednesday demanding the revocation of the closure ruling.

The President's half-brother, Probosutedjo, followed yesterday with a similar legal challenge on the closure of his Bank Jakarta.

Bambang even went as far as criticizing Bank Andromeda's closure as a political move orchestrated by Minister Mar'ie early this week. Probosutedjo also expressed his anger, blatantly defying the government's ruling by opening his bank Tuesday allowing depositors to withdraw part of their savings.

Probosutedjo Monday described the closure as a serious violation of human rights.

"This is truly an insult, as if the owners of the liquidated banks had committed subversive crimes," Probosutedjo said.

The two banks were among the 16 banks closed last Saturday in the first move to reform the banking system following the announcement of an International Monetary Fund-sponsored financial assistance package.

However, Bank Industri, partly owned by Soeharto's second daughter, Titiek Prabowo, has not signaled its intention to challenge the closures.

Moerdiono yesterday repeated his appeal to the nation to view the closures with calm and urged public support for the reform package which was designed to establish a healthier economy.

Moerdiono hastily dismissed rumors that Finance Minister Mar'ie was considering to resign over the criticism and legal moves concerning the bank closures.

"The closure of the 16 banks is also part of the reform measures and should be seen within the medium-term objective of improving economic efficiency and competitiveness," Moerdiono added.

"I don't think they would by any means affect the implementation of the economic reform measures," he added in replying to questions as to whether the lawsuits would not stand in the way of the package.

President Soeharto has not made any direct comment on his son's complaints. However, Soeharto expressed confidence Wednesday that the country would overcome the economic crisis due to strong support from the international community and the still healthy fundamentals of the economy.

"We do have programs and we have invited the IMF to study these programs," he said at a press conference after a three-day summit of the Group of Fifteen (G-15) in Kuala Lumpur.

Separately, Golkar chairman Harmoko yesterday hailed the government's crackdown on problem banks and expected it to follow up the policy with another reform package to slash the high costs of the economy.

"The bank closure augurs well with our efforts to cope with the monetary turmoil and the objective to make the national economy gain a stronger foundation," Harmoko said at the Golkar office.

Harmoko said that he could understand the legal recourse pursued by people who were affected by the government policy.

However, he dismissed that the legal battle represented a loss of confidence in the government. "I don't think it goes that far. The dispute surfaced only because some people feel disappointed with the policy," Harmoko said.

He said he did not think the liquidation would affect support for Soeharto's renomination.

IMF Managing Director Michel Camdessus said in Paris Thursday night that he was very satisfied by market reaction to a multi- billion dollar aid package for Indonesia, and said it was already working to restore market confidence.

He also expressed confidence that the government would proceed with key elements of the economic reform package agreed as a condition of the aid, including closing banks controlled by members of President Soeharto's family.

"I am myself very satisfied by the way the markets have reacted" to the Indonesian program, Camdessus told a news conference during a stopover in Paris ahead of a visit to Indonesia and other Southeast Asian countries next week.

"The rupiah has consolidated ... and confidence is beginning to return."

He also said he did not expect the government to back down on economic reforms included in the aid deal despite complaints from vested interests.

"All of Jakarta's high society are in a state and IMF representatives in Indonesia are very unpopular with them at the moment," Camdessus said.

But "the President and the government authorized all of this," and agreed to tackle all of its economic problems "head-on," he said. (prb/amd)

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