Government defends closure of bad banks

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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