IBRA bashing

IBRA bashing

Analysts, senior officials and the media have of late been
increasingly critical of the Indonesian Bank Restructuring Agency
(IBRA), which will end its government mandate later this month,
due primarily to two reasons.

One is the recent disclosures by print media of what the
public perceives to be the indecently huge packages of
compensation IBRA senior officers have been enjoying.

The other is the proposal the IBRA reportedly made that the
government provide all the agency's employees and members of its
supervisory board -- including the ministerial Financial Sector
Policy Committee -- with immunity against damages or law suits
that may arise in the future from the execution of their jobs.

Minister for State Enterprises Laksamana Sukardi said on
Wednesday the IBRA had never asked for immunity from lawsuits.
However, provisions in the draft of the presidential decree,
which is being prepared for the official termination of the
agency, did allude to such a request.

Controversy, intense public scrutiny and fierce criticism have
always surrounded the IBRA since it was established in early
February, 1998. Unsurprisingly -- as it became, at least during
the first three years of its operations, the most powerful
economic organization in the country. The IBRA managed more than
Rp 650 trillion (US$75 billion) worth of assets taken from closed
and nationalized banks and controlled all the largest financial
institutions in the country.

No wonder then, the agency has so far seen seven successive
chairmen amid incessant political meddling by senior officials
and vested-interest groups.

Given its vitally important mission -- to recover a large
amount of value from assets left behind by the 1997-1999 economic
crises -- the IBRA was granted extra-judicial power to foreclose
on the assets of debtors and to file civil lawsuits and
bankruptcy petitions against debtors.

However, recent revelations by print media of what the public
perceives to be huge compensation packages enjoyed by IBRA senior
officials have put the agency in even hotter water.

IBRA chief Syafruddin A. Temenggung, for example, has
reportedly been enjoying a monthly take-home pay (net) totaling
Rp 130 million ($15,300), consisting of Rp 75 million in basic
salary and Rp 55 million worth of other allowances for
accommodation, insurance, a car, a driver, and even gasoline. His
deputies brought home Rp 111 million monthly, including
allowances. Since severance allowances are based on salaries,
these senior officials will get impressive golden handshakes
later this month when the IBRA shuts down. It's unsurprising the
public views these payouts as the height of greediness.

But IBRA senior officials do deserve high salaries given their
large responsibilities. They should be adequately remunerated to
minimize corruption because the nature of their jobs exposes them
to the heady temptations of malfeasance. Yet their reward for
service does seem high, if compared with those of Cabinet
ministers, who get only Rp 19 million in monthly basic salaries
plus housing and car allowances.

Moreover, the IBRA's performance hasn't been so impressive
that its senior officers deserve such lucrative packages. The
agency has been able to recover only an average of 34 percent of
the assets under its management, compared to similar operations
in South Korea and Thailand, which netted 40 percent and 39
percent respectively.

Yet even more mind-boggling is the request the IBRA reportedly
made for legal immunity (acquit de charge) for all its employees
against damages and litigation in the future.

That request, if it was actually made, is entirely irrational
and insensible, especially because IBRA has yet to undergo its
own investigative audit. All criminal cases that may subsequently
be discovered during investigative or forensic audits should be
brought to court and the culprits should be brought to justice.

We do, however, strongly suggest that IBRA employees and
supervisors be granted indemnity against suits that may arise in
the execution of their duties -- as long as those duties are
proven to have been executed properly.

We should differentiate honest mistakes from collusive
practices or corruption. IBRA officials should be indemnified
against damages caused by honest mistakes or unintentionally poor
judgment. Nobody in the government would have the courage to make
any decisions if its officials were not indemnified against
damages or litigations caused by honest mistakes.

The IBRA has thus far concluded tens of thousands of
transactions related to the assets under its management. As long
as the deals were made according to standard operating procedure
its employees should be fully indemnified against possible
litigation.

Without such an indemnity insurance, IBRA employees could be
highly vulnerable to blackmail by corrupt police or public
prosecutors.