Government in a bind in battling graft

JAKARTA (JP): Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie said on Wednesday that the new government was facing a dilemma in rooting out corruption in the country because of its huge scale.

He said uncovering and prosecuting those involved in the billions of dollars of corruption at state banks alone would lead to a large number of businesspeople and bankers being imprisoned and runs the risk of crippling economic activities.

Kwik asked legislators whether they were ready if all cases of corruption, collusion and nepotism (KKN) at state banks were disclosed.

"The results will be shocking. The total amount of their bad loans could reach Rp 600 trillion (US$85 billion), which is three times the size of our state budget," Kwik told the House of Representatives.

"This is a dilemma the government is facing," he said.

Kwik's remarks followed last week's revelation by Minister of Investment and the Empowerment of State Enterprises Laksamana Sukardi of an alleged Rp 9.6 trillion loan scandal involving the giant textile and engineering Texmaco Group and former president Soeharto.

Texmaco founder and CEO Marimutu Sinivasan denied the charges, although he was immediately named a suspect in the scandal.

Several legislators demanded the resignation of Laksamana, arguing that his revelation of the Texmaco case caused a serious blow to the company's debt restructuring process.

Bank Putera Multikarsa, Texmaco's financial arm, was hit by a massive run by depositors early this week causing it to suffer a severe liquidity crisis that prompted the central bank to suspend its clearing activities on Tuesday.

Laksamana and Kwik are both senior members of the Indonesian Democratic Party of Struggle (PDI-Perjuangan), the largest faction in the House.

The two were strong critics of the former, allegedly corrupt, administration of Soeharto.

But Kwik assured the House Abdurrahman Wahid's administration was determined to fight corruption despite the dilemma and possible strong resistance from bureaucrats who had been part of the past regime.

He called on the House to support the drive to root out corruption and create a clean government.

Kwik said there were 12 other cases similar to the Texmaco affair.

He said the amount of money involved in the Texmaco affair was even smaller than the sums involved in several other major cases which would be revealed.

"The amount of bad loans in state banks reach hundreds of trillions of rupiahs. I will release them later on," he said.

Cleaning up state banks is a key factor in the success of the country's costly bank restructuring program. It's no longer a secret that they were often treated as a cash cow by Soeharto and his family members and cronies.

The state banks have transferred more than Rp 267 trillion worth of bad loans to the Indonesian Bank Restructuring Agency (IBRA).

Kwik said many of the bad debtors had inflated the value of their projects and the collaterals pledged to secure their loans from state banks.

"If their collaterals were audited properly, their real value could plunge 40 percent," Kwik added.

He said the present government inherited a bankrupt economy from officials and businesspeople alleged to have been involved in KKN practices.

"We will open the credit portfolios of state banks one by one and will disclose them to the people," Kwik said.

Kwik also called on the House to deal firmly with its members who received money from conglomerates in return for not revealing their KKN practices at House meetings.

Disclosing the debt profiles of large bad debtors would not hinder economic recovery because their businesses had been damaged anyway, Kwik added. (rei)