IBRA closes, leaves huge tasks behind

Dadan Wijaksana and Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

Most people perceive that messy legal cases and the massive cost of the late 1990's banking crisis are the legacy of the Indonesian Bank Restructuring Agency, which the government officially dissolved on Friday.

While the agency was praised for reaching its fiscal target, questions remain over whether this feat was worthwhile considering the huge price that taxpayers must shoulder.

President Megawati Soekarnoputri was thankful for the agency's accomplishments during its almost six-year tenure, saying the closure "was a sign of Indonesia's recovery from a deep crisis. As President, I thank IBRA's officials for their hard work," she said.

Also on a positive note, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti, said that various improvements in the banking sector were examples of a job well done.

However, until its closure, the agency -- which took over Rp 650 trillion worth of assets from troubled banks and former owners following the late 1990s financial crisis -- had only raised around Rp 168.2 trillion from selling the assets. This comprised of a recovery rate of 28 percent, deemed relatively low compared to the achievements of similar agencies in other crisis- hit countries.

The remaining 72 percent was declared "the cost of the crisis," by IBRA.

The agency was mandated to recover as much money as it could from the assets to recover the government's huge bank bailout cost of around Rp 650 trillion.

The remaining 72 percent would be recovered from the budget, limiting its capacity to fund other projects.

Also, some former bank owners will be cleared of criminal charges, despite their violation of banking regulations prior to the crisis and their alleged misappropriation of the bailout funds.

IBRA chairman Syafruddin Temenggung said that during its operation, the agency had been "badly done by" in court. Some rulings had been against the agency, while the bulk of cases were still pending.

There are still 1,361 unsolved legal cases, the majority of which center on asset disputes. The cases are worth a total of Rp 25 trillion and involve 447 debtors.

"To sum up, although not entirely at fault, IBRA was a good example of an institutional failure. Our messy legal system also contributed to the fact that the agency preferred to seek out-of- court settlements," the University of Indonesia's economist Chatib Basri told The Jakarta Post.

Chatib said the agency had failed to fulfill the most crucial of all its tasks, which was to make the country's banking sector healthier in every aspect, not just financially but in terms of its internal-control mechanism and its intermediary role.