Hubert Neiss testifies in BI governor's trial

JAKARTA (JP): The former deputy director of the International Monetary Fund (IMF)'s Asia Pacific operations, Hubert Neiss, testified in the trial of Bank Indonesia's Governor Sjahril Sabirin on Wednesday that the IMF had recommended the guarantee scheme over the third party.

"Yes, we recommended the guarantee scheme to the Indonesian government in order to assure that the third party's claim over the defunct banks would be paid. As we knew that this country's national banks were collapsing at the time, it was what we called an emergency situation," he told the Central Jakarta District Court.

"We also recommended the scheme in order to avoid a bank-run held by the third party's customers should they have heard that their bank was unhealthy," he said.

The court is trying Sjahril over his alleged role in the questionable disbursement of Rp 904 billion of the Bank Indonesia liquidity support fund (BLBI) to Bank Bali in 1999.

Hubert, as well as local banking expert Pradjoto, were summoned by the court as expert witnesses to testify in the trial.

BI disbursed Rp 904 billion claimed by Bank Bali as loans it issued to three defunct private banks -- Bank BDNI, Bank Tiara and Bank Umum Nasional. The government liquidated the three banks in the aftermath of the financial crisis in 1997.

Bank Bali obtained the money with the help of PT Era Giat Prima (PT EGP) owned by Setyanovanto, a legislator of Golkar Party, which accepted Rp 546 billion of the Rp 904 billion of Bank Bali's claim.

Hubert said the IMF set the exact date of Bank Bali's payment, on May, 28, 1999 to accelerate the process of bank restructuring.

Hubert, however, said that the IMF was not involved in the process as "Bank Indonesia and IBRA (Indonesian Bank Restructuring Agency) were the parties that had to proceed it."

"All we did was just advise the government to streamline the payment process, ...the payment itself was the government's obligation. And it was not our responsibility either if there were any violations in the process, should Bank Bali or other related parties have done it for their own interests," he said.

Asked if he knew that the IMF had found out that the process violated the joint agreement between the IBRA and BI on the guarantee program for defunct private banks, Hubert said: "Yes, I did."

Pradjoto, who also testified before the court, questioned how "a mediator existed between the government and Bank Bali in order to streamline the payment process."

"I wonder how this "mediator" could accept more than 50 percent as payment from Bank Bali for helping realize its claim. In fact, the claim was Bank Bali's right and such a fee only lessened its assets," Pradjoto said.

Pradjoto was referring to PT EGP.

The court was adjourned until Sept. 5 when the court will cross-examine the defendant.(tso)