Government vows thorough resolution of bank scandal

Government vows thorough resolution of bank scandal

JAKARTA (JP): The government is determined to thoroughly
resolve the Bank Bali scandal, including taking legal action
against wrongdoers as demanded by the International Monetary Fund
(IMF), according to Coordinating Minister for Economy, Finance
and Industry Kwik Kian Gie.

"The Attorney General will continue investigations against all
wrongdoers," Kwik said on Thursday in a press statement. "For the
wrongdoers legal action will be taken," he added.

Kwik explained that the government would take measures to
prevent a similar scandal from reoccurring, including
strengthening both the Indonesian Bank Restructuring Agency
(IBRA) and banking supervision at Bank Indonesia and particularly
strengthening the supervision of the government blanket guarantee
program.

"In addition to that, the House of Representatives will also
continue its probe into the Bank Bali scandal," he said.

The government has just released the long-awaited
PricewaterhouseCoopers (PwC) audit report into the scandal,
paving the way for a resumption of crucial international loans,
including those from the IMF.

The loans were suspended in September after the previous
administration of B.J. Habibie declined to publish the PwC
report, raising skepticism that it could satisfactorily resolve
the scandal.

Meanwhile, visiting IMF Asia-Pacific director Hubert Neiss
reiterated on Thursday that the government must take firm legal
action against the culprits in the scandal and take measures to
prevent such scandals reoccurring as a precondition for the
return of international confidence.

Neiss applauded the publication of the full PwC report, but
warned that the above follow-up measures were also as crucial.

"I think the report is very comprehensive, but of course, as
always, there are some loose ends in every report that need
further inquiries," he told reporters following a meeting with
Amien Rais, Speaker of the People's Consultative Assembly (MPR),
the country's highest legislative body.

Neiss, who will leave Jakarta on Friday, also met with Speaker
of the House of Representatives Akbar Tandjung afterwards.

The Bank Bali scandal revolves around the transfer of some Rp
546 billion (about US$80 million) in commission from the bank to
private firm PT Era Giat Prima (EGP) for its service in helping
the bank to recover some $120 million in interbank loans owed by
closed down banks.

But since the loans were guaranteed by the government's
blanket guarantee program, Bank Bali was not supposed to use the
services of EGP.

PwC said that there are indications of "corruption" and
"fraud" in the Bank Bali-EGP transaction.

The PwC report listed several "influential" names who had
received a portion of funds possibly related to the Bank Bali
commission money.

The report recommends further investigation of several senior
government officials and former officials, including Arnold
Baramuli, chief advisor to Habibie and former head of the Supreme
Advisory Council (DPA), former state minister of the empowerment
of state enterprises Tanri Abeng, former finance minister Bambang
Subianto and several other Golkar Party key officials.

Many of the prominent names were not included in the list of
those who had received a portion of the Bank Bali commission
money, but PwC said: "Due to the evidence contained in this
report, it is not possible for us to totally dismiss the
potential involvement of such persons in the Bank Bali matter."

Neiss said that Amien agreed with the IMF standing that it
would only disburse the loans after the government showed a
commitment to resolve the scandal satisfactorily, including
taking necessary legal action.

Neiss said that before the Fund disbursed the loans, the
government must first complete a new letter of intent (LoI) which
was to be submitted to the IMF board of directors as a basis for
loan disbursement.

But Neiss said that before the Fund's expert team could come
to Jakarta to start designing a new LoI with the government's
economic team, the IMF board of directors must give a green
light.

Neiss said that work on the new LoI would quickly start once
the IMF board of directors gave the green light.

He expected that a new LoI could be completed in the middle of
December, raising hopes that the Fund would disburse its loans
late in the month or in early January.

The IMF is organizing a $43 billion bailout for Indonesia. The
Fund itself has a commitment to provide some $12.3 billion, in
which around $9.5 billion had been disbursed. The Fund will
disburse another $460 million once it approves the new LoI.

Finance Minister Bambang Sudibyo has said that Indonesia would
need some $1.2 billion in international loans from the IMF, World
Bank, and the Asian Development Bank, to help finance the state
budget in the remaining period of the current fiscal year ending
March 2000. (rei)