Mon, 15 Dec 2003

IBRA faces increasing calls for investigative audit

The Jakarta Post, Jakarta

As the tasks of the Indonesian Bank Restructuring Agency (IBRA) near completion, debate intensifies on whether an investigative audit on the agency is needed to check for possible irregularities during its five-year existence.

Such an audit, which would be different from the annual audits IBRA has been holding so far, would cover all IBRA transactions and working processes from the moment the agency was set up in 1998 to its planned closure on Feb. 27.

"I think it's a must. An investigative audit will show whether all the processes, be they restructuring assets, asset sales and others, have been optimum," Dradjad Wibowo, an economist at the Institute for the Development of Economics and Finance (Indef), told The Jakarta Post on Sunday.

The audit, he added, could then investigate suspicions of widespread improper practices.

Dradjad was echoing a chorus of similar calls saying it was the best way to ensure that accountability was rendered. Some legislators have also voiced the same opinion, urging the Supreme Audit Agency (BPK) to act as the auditor.

Since its establishment, IBRA -- which controls billions of dollars worth of assets taken from troubled banks and indebted bank owners -- has faced interference from powerful politicians and businessmen, which critics say is the main reason for alleged bad business practices in the agency.

Politicians, who are in need of cash and see the agency as a potential cash cow, have reportedly been vying to influence the agency. The fact that the incumbent head, Syafruddin Temenggung, is the agency's seventh boss since its establishment would seem to bear this out.

It is this that has prompted calls for the investigative audit.

Syafruddin has said that the agency had no problems with the demand.

Speaking during a hearing with the House of Representatives' Commission IX on financial affairs last week, Syafruddin said he would not mind if an independent auditor was appointed to conduct the audit.

However, Raden Pardede of the Danareksa Research Institute was against such an idea. "I don't think it's necessary. More work, more committees, this will only create an endless cycle of work. IBRA is being audited each year, why don't we use that as a guideline.

"Then, if there are cases that need to be clarified, then maybe verification will be needed, but that's it. It does not have to be a full audit all the way from the start," Raden told the Post.

Raden also urged that similar verification be conducted on the agency's unsold assets to avoid possible disputes in the future involving the new executive bodies that it is planned to set up after IBRA's winding up.

IBRA is mandated to restructure and sell the assets in the form of non-performing bank loans and fixed assets taken from troubled banks and indebted former bank owners, to raise cash to help finance the budget, which is heavily weighed down by the huge cost of bailing out troubled banks.

Among the much-criticized aspects of IBRA works is the slow progress in forcing former bank owners repay their debts (most of them have still not repaid their debts after years of negotiation), and the fact that many of the loan assets that have been sold are suspected to have been repurchased by the debtors at huge discounts.

The agency has posted a recovery rate of 28 percent for the assets under its control, which is higher than the recovery rates of similar agencies in countries such as China (8 percent), Thailand and South Korea (about 25 percent).