IBRA admits pressure from outsiders

IBRA admits pressure from outsiders

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA),
the country's largest and most powerful economic entity,
acknowledged on Friday to facing massive pressure from
"outsiders" trying to take advantage of huge assets under its
control.

IBRA deputy chairman for risk management Arwin Rasyid said the
agency had so far succeeded in weathering the pressure and
maintaining its professionalism and credibility.

"With the size in wealth and assets we're holding, no wonder
many parties try eagerly to take advantage and want a piece of
the action from us," he told reporters after a seminar on IBRA.

"This is an acid test for IBRA's professionalism," he said.

"But to my knowledge, the pressure (from outsiders) was never
successful," Arwin said.

Arwin was responding to increasing concern caused by the
disclosure of an alleged Rp 546 billion (US$78 million)
under-the-table payment from Bank Bali that many lobbyists had
tried to influence the agency's policy and decision.

IBRA, an agency under the Ministry of Finance, was set up
early last year to help the government restructure and
recapitalize the banking sector. It is also in charge of
administering the government's blanket guarantee scheme for bank
deposits and claims launched in late January 1998.

The agency has become a mammoth entity controlling a total of
Rp 600 trillion worth of assets, including over $30 billion in
bank nonperforming loans (NPLs) and $10 billion worth of shares
in various companies, pledged by former bank owners to repay
their debts to the government.

IBRA is vested with extrajudicial power in executing its
tasks, authorized to seize and sell bank assets without going
through the court process and to restructure and change the
management of various large companies.

But the emergence of the Bank Bali scandal, which allegedly
involved a deputy chairman of the agency, has raised the question
of possible irregularities at IBRA and damaged its integrity and
credibility.

IBRA chairman Glenn S. Yusuf confirmed on Friday the finding
of a preliminary audit that Bank Bali paid Rp 546 billion to an
investment firm, PT Era Giat Prima (EGP), in what was called a
fee for recouping the bank's interbank claims on closed-down
banks from IBRA.

EGP is owned by businessman Setya Novanto, who is deputy
treasurer of the ruling Golkar Party.

Glenn said that the agency was aware of the questionable
transaction only after the UK-based Standard Chartered Bank
reported on July 20 the result of its due diligence audit on Bank
Bali.

Standard Chartered conducted the audit because it intended to
buy a 20 percent stake in the under-capitalized bank.

Glenn's statement confirmed an earlier revelation made by
banking legal expert Pradjoto who alleged that an IBRA deputy
chairman was implicated in a fraud related to the reimbursement
of Bank Bali's interbank loans from closed-down bank BDNI.

Pradjoto earlier speculated that the money from the
transaction might have been given to Golkar.

Glenn said that the payment made by IBRA to Bank Bali was
based on prudent principles and verification made jointly with
Bank Indonesia (the Central bank). But the process did not
involve any mediators.

"There is no reason at all for Bank Bali to use the service of
third parties like EGP because the interbank claims were
guaranteed by IBRA under the government blanket guarantee
program."

He said that the agency was investigating the transaction.

Glenn said IBRA received from Bank Bali's caretaker management
on Wednesday a report confirming a cession agreement between Bank
Bali and EGP and the payment of Rp 546 billion by the bank to EGP
in early June.

"But the cession agreement is unusual. Unlike the standard
cession contract, the Bank Bali-EGP agreement does not stipulate
any up-front payment by EGP as the buyer of Bank Bali's interbank
loans."

Arwin said that a credible and transparent investigation into
the controversial Bank Bali case was necessary to clear IBRA's
reputation.

"We have to move very fast ... because all the eyes of the
world from Washington to the (local) House of Representatives are
watching us closely," he said.

"We'd like to be fully transparent with the Bank Bali case
but, of course, within the boundary of the regulation," he said,
citing the banking secrecy clause.

Arwin said that the agency must not succumb to external
pressure, including influential politicians, if the agency is
really serious about maintaining confidence in its policy.

"Once we make a fatal mistake, the repercussion could be quite
devastating," he said.

Concern over the possible fraud of IBRA's assets has
increased, particularly in view of rumors that a special team in
charge of securing the reelection of President B.J. Habibie was
going all out to raise a huge sum of funds to buy votes in the
November presidential election.

Meanwhile, Kwik Kian Gie, a senior official of the Indonesian
Democratic Party of Struggle (PDI Perjuangan), said at a media
conference on Friday that his party would cooperate with the
reformist faction at Golkar to probe the alleged fraud at Bank
Bali.

Kwik said that the revelation made by Pradjoto was factual and
based on a set of documented data.

"The detailed information contained in the data is so
elaborate that its authenticity is beyond a reasonable doubt," he
said after a meeting with Pradjoto at the PDI Perjuangan office.

Separately, Minister of Finance Bambang Subianto said on
Friday that he was completely caught off guard by the
irregularities at Bank Bali.

PDI Perjuangan's chairwoman Megawati Soekarnoputri is the
leading contender of Golkar's presidential candidate, the
incumbent President Habibie, in the upcoming presidential
election. (rei/udi)