IMF softens its position toward Bank Bali scandal
IMF softens its position toward Bank Bali scandal
WASHINGTON (Dow Jones): The International Monetary Fund has softened its stance toward Indonesia slightly in relation to its demands for a resolution to the Bank Bali scandal, Indonesia's Deputy Central Bank Governor Miranda Gultom said Wednesday.
Speaking after she attended bilateral meetings between Indonesian and IMF officials this week, Miranda said the Fund now "understands" the central bank's argument that it can't release the full report of a recent audit into the Bank Bali case.
"I think they now have a better of understanding here of what our positions are at Bank Indonesia," Miranda told Dow Jones Newswires. "I think they are understanding that there are some legal issues here" concerning the release of the report by PricewaterhouseCoopers.
"From what I heard from them, they are now emphasizing their wish to see some progress made in resolving the Bank Bali case," she said. "They also now think, like us, that publishing the full report, if it were true that the report was not of good quality, cannot be positive."
IMF Asia-Pacific Director Hubert Neiss was very specific Tuesday, however, in outlining the Fund's demands during a press conference. He reiterated the IMF's four main demands relating to the case: that Indonesia undertake an investigation; that the investigation's results be made public; that proceedings be launched against people involved in any illegal acts; and that measures are taken to ensure there is no recurrence of similar events.
PricewaterhouseCoopers was commissioned to review the case - which relates to an US$80 million payment by Bank Bali to a firm linked to the ruling Golkar Party, ostensibly for the collection of government-backed debts. However, the government hasn't released a full report of that audit, which is believed to name certain government officials.
In a press conference last week, IMF Managing Director Michel Camdessus called on Indonesia to release the PricewaterhouseCoopers report.
The IMF has responded to the case by postponing a review of Indonesia's economy, thereby effectively delaying disbursement of the next tranche of a $12.1 billion loan.
Miranda argued that Bank Indonesia hasn't the power to release the report because it is a matter for the government's supreme audit board, which has refused to make the full contents public.
She said Bank Indonesia officials haven't seen the contents of the report.
Miranda said speculation that Sjahril Sabirin is guilty of complicity in the scandal is unfounded and that the House of Representatives' recent demand that he and six other officials be suspended to allow an investigation into their roles is an example of the "scapegoating" risks that lie in publicizing the report.
Miranda also said that Bank Indonesia made its own inquiries early in July and August, when it discovered a large discrepancy in Bank Bali's June 30 accounts, but that, "just as bank supervisors in any industrialized country would do," the central bank didn't publicize its own inquiries.
She said the IMF and the World Bank are now encouraging Bank Indonesia to publicize the fact that it made these early investigations.
She acknowledged, however, that Bank Indonesia needs "to improve (its) supervisory capacity, and to train (its) investigators in terms of the sensitivity of such issues."
Miranda expressed concern that the Bank Bali crisis had had a "demoralizing" effect on Bank Indonesia staff members and, more importantly, on members of the Indonesian Bank Restructuring Agency.
IBRA has been charged with the daunting task of recapitalizing and restructuring Indonesia's distressed banking sector. The Agency has set itself a target of selling Rp 17 trillion worth of corporate assets that it has absorbed as part of the recapitalization process, but most analysts believe that target can't now be met, given the sell-off in Indonesian asset markets since the Bank Bali case arose.
"The bank restructuring and the bank recapitalization program has to move on" if Indonesia is to make a sustained recovery from its recent financial crisis, Miranda said. "I think the Fund and the (World) Bank realize that."
Miranda said Bank Indonesia sees the rupiah's fair value in a range of Rp 6,000 to Rp 6,500 to the dollar once the Bank Bali case and the current furore over East Timor subside. Late Wednesday, the dollar was trading at Rp 8,350.
She also spoke of Indonesia's role as an observer in a meeting between an East Timorese delegation and prospective official donors to the former Portuguese province Wednesday. That meeting, sponsored by the World Bank, was to include the IMF and the Asian Development Bank, as well as bilateral donors such as Australia, Portugal and the U.S.
Miranda said Indonesia supported a speedy introduction of development aid to East Timor after the Indonesian parliament formally ratifies its independence in a special sitting in November. "It's in our interests to have a healthy neighbor," she said.
Indonesia annexed East Timor in 1975 but its forces are currently withdrawing after violence that followed a referendum resulting in an overwhelming vote for independence last month.
The violence that ensued after that vote prompted an international crisis, which eventually led Indonesia to accept the deployment of international peacekeeping force.