Fri, 11 Feb 2000

Govt comptroller to audit liquidity support and BI

JAKARTA (JP): The Development and Finance Comptroller (BPKP) will start on Monday its investigative audit of the vast funds provided by Bank Indonesia (BI) as liquidity support to local recipient banks, according to BPKP chief Arie Suhendro.

Arie said on Thursday that the investigative audit would involve 270 experienced auditors and was expected to be completed in May.

"We'll start the audit on Monday," he said at a hearing session with the House of Representatives Commission IX on Banking and State Budget.

He said that the investigative audit into recipient banks was demanded by Minister of Finance Bambang Sudibyo.

He said that since the House also ordered the State Audit Agency (BPK) to investigate the recipient banks, BPKP would coordinate with BPK to avoid overlapping.

The House has also ordered BPK to conduct an investigative audit of BI over possible abuses in the channeling of the liquidity support. BPK has said that it expected to complete its investigative audit sometime in July.

The government via BI had provided some Rp 164.5 trillion (US$22.5 billion) in emergency liquidity support between late 1997 and 1998 to help ailing banks stay afloat amid massive bank runs.

Around Rp 100 trillion of the liquidity support went to five banks including the nationalized Bank Central Asia (BCA) and Bank Danamon, and the now defunct Bank BDNI and Bank Umum Nasional (BUN), whose powerful tycoon owners are close to the former authoritarian president Soeharto.

BPKP revealed in its recent general audit report that some Rp 50 trillion of the liquidity support was improperly channeled, while BPK said in a similar report that the questionable amount was around Rp 80 trillion.

There has been suspicion that the owners of the recipient banks used the liquidity support to buy U.S. dollars, which in part contributed to the deep plunge of the rupiah against the dollar in 1998.

Former finance minister Fuad Bawazier on Wednesday blamed the central bank for the abuse of the liquidity support.

Former central bank governor Soedradjad Djiwandono denied this allegation, pointing out that the liquidity support program was a policy agreed to together with the government to prevent the complete breakdown of the country's banking system amid massive bank runs.

The controversy surrounding the bank liquidity support program has become the latest rift among the country's political elite after last year's high profile Bank Bali scandal.

But many analysts believe that there has been abuse of the liquidity support funds.

"I believe that the liquidity support has been abused. The planned investigative audit is the right step," said legal banking expert Pradjoto, who first revealed the Bank Bali scandal in July 1999.

"Indonesia is one of the largest corrupt countries in the world," said Sri Adiningsih, a noted economist at the Gadjah Mada University.

Analysts also said that the mishandling of the liquidity support was a "collective mistake" by the government and the central bank.

"I think it is naive for the ex-finance ministers to blame this problem solely on the central bank," said another Gadjah Mada University economist, A. Tony Prasetiantono.

Meanwhile, legislator Paskah Suzetta, a member of the House special investigation team, revealed that a classified letter from the then president Soeharto (dated Dec. 27, 1997) ordering the government and the central bank to provide the liquidity support to all banks was leaked to the industry, prompting banks to take advantage of the facility.

He said that the government previously limited the emergency facility only to banks facing liquidity problems. (rei)