Govt to pull forestry funds from embattled state banks

JAKARTA (JP): Forestry funds amounting to Rp 2.6 trillion (US$305.8 million) currently deposited at state banks will be withdrawn, a minister said on Tuesday.

Minister of Forestry and Plantations Muslimin Nasution said the funds would be shifted to Bank Bukopin and Bank Muamalat Indonesia.

Muslimin said the withdrawal from the three state banks -- Bank Ekspor Impor Indonesia, Bank Dagang Negara and Bank Bumi Daya -- would happen gradually so that the pullout would not disrupt the state banks' liquidity.

He said Bukopin was selected because an international auditor's assessment showed the bank was healthy.

"We will also open an account at Bank Muamalat to deposit some of the money, because Bank Muamalat operates under an Islamic banking system."

Financial institutions operating in accordance with an Islamic banking concept base their operations on a profit-sharing system both with their depositors and borrowers. Bank Muamalat is the only a manjor Indonesian bank managed under the Islamic banking ethos.

Muslimin said banks managed under the Islamic system were relatively safer than conventional banks, especially when faced with challenges created by the current economic turmoil.

He said the measure to move the deposits was initiated because many of the state banks were unsound and the reforestation fund, which amounted to Rp 2.6 trillion at the end of March, was often used for bank liquidity problems. (gis)