IMF warns of impact of Bank Bali scandal
IMF warns of impact of Bank Bali scandal
JAKARTA (JP): International Monetary Fund (IMF) Asia Pacific
director Hubert Neiss warned on Wednesday that it would be a
disastrous scenario if the government failed to resolve the Bank
Bali case satisfactorily.
He said a satisfactory solution was crucial to restore
investor confidence in the country's economy and government
economic reform program.
"A nonsatisfactory solution would be a disastrous scenario,"
Neiss told an international seminar on Indonesian economy.
But Neiss refused to answer definitive questions as to whether
the Fund would suspend the next disbursement of bailout money to
Indonesia if the government handling of the Bank Bali case did
not meet its expectation.
"Let's wait and see whether a satisfactory solution will be
obtained," he said.
"We'll take firm action if it's necessary," he said in reply
to a barrage of similar questions from reporters.
"But the IMF is taking a firm position against corruption. So
you may expect firm action from the IMF," Neiss responded in an
irritated tone after American economist Paul Krugman, speaking at
the same meeting, criticized the IMF for what he saw as a meek
stance.
The IMF earlier demanded the government to investigate the
case thoroughly and swiftly, make the findings public and take
legal action against all wrongdoers.
However, Krugman appeared to take the Fund's stance on the
issue as too weak, warning it to act firmly to avoid a Russian-
style confidence crisis in Indonesia.
He said that although the IMF had to tread carefully in
dealing with the politically related scandal, the Fund must not
wait too long to take strong action.
"I think the IMF has to be careful, not in terms of economic
comments, but in terms of not taking sides in a political
conflict," Krugman said on the sidelines of the seminar.
"But if this goes on for very long, yes (the IMF will have to
act firmly) because the IMF cannot afford another Russia," he
said, referring to the Fund's much-criticized failure in bailing
out Russia due to a massive embezzlement of state funds.
The economic professor of the Massachusetts Institute of
Technology has been a staunch critic of the IMF policy in
handling the Asian economic crisis.
The World Bank has taken a stronger approach to the government
to resolve the Bank Bali case swiftly and satisfactorily.
World Bank country director for Indonesia Mark Baird
threatened on Tuesday to halt budgetary support for Indonesia
unless the government concluded the investigation into the Bank
Bali case swiftly and in a transparent manner.
The high profile scandal centered in the transfer of Rp 546
billion (US$80 million at current rate) in funds from Bank Bali,
which is to be recapitalized by the government, to a firm called
PT Era Giat Prima (EGP), which is linked to President B.J.
Habibie's close associates, including his ministers and younger
brother.
Habibie loyalists were accused of trying to raise money to
bankroll Habibie's presidential race in November.
Habibie is currently under strong pressure from the public,
opposition leaders and even from top executives in his Golkar
Party to investigate the case transparently and take legal action
against all people involved.
Habibie
Separately, Habibie urged people on Wednesday to wait for the
results of an international audit into the case to find out what
really happened.
Speaking at a joint news conference in Kuala Lumpur with
Malaysian Prime Minister Mahathir Mohamad, Habibie said he was
"also anxious to know" whether his Golkar Party was involved in
orchestrating the Bank Bali case.
EGP is owned by two businessmen, one of whom is also a deputy
treasurer of Golkar.
"People should wait for the audit report to find out what
happened," Habibie was quoted by Dow Jones as saying.
Habibie was in Kuala Lumpur for a one-day visit.
The government has appointed Australia's auditor
PricewaterhouseCoopers to take part in the investigation of the
scandal.
"If it depended on me, the sooner the better," Habibie said.
In a related development, economists and legislators
criticized Habibie on Wednesday over the slowness in handling the
scandal.
Economist Rizal Ramli of Econit, a private think tank, said:
"The investigation has taken more than a month, but the question
on who were involved in the scandal remains unanswered."
"The scandal could ruin Habibie the same way former U.S.
president Richard Nixon was brought down by the Watergate
scandal," he said.
Golkar legislator Paskah Suzetta warned the President that
people would take to the street if he ignored the public and
international demand for a thorough and satisfactory resolution
to the scandal.
"If Habibie ignores the warning, people may take to the street
to push their demands," he said.
University of Indonesia economist Sri Mulyani said that it's
unavoidable for the World Bank and the IMF to intervene in the
scandal because of their important role in rebuilding the
country's crisis-hit economy.
Noted economist Sjahrir, who was also a speaker at the above
seminar, aired his concern over attempts to cover up the
involvement of influential people in the scandal.
"There are aspects of a cover-up ... there's a conspiracy of
silence stretching from the President to his lower officials," he
said.
"It's goodbye to economic recovery if the government fails to
solve the Bank Bali case properly," he added.
Meanwhile, National Police spokesman Brig. Gen. Togar Sianipar
said on Wednesday that in order to speed up investigations into
the scandal, the police sent necessary documents to the Attorney
General's Office almost one week ago to support the request for
questioning EGP president Setya Novanto, who is a member of the
People's Consultative Assembly (MPR).
"But until today, those documents seem to remain untouched. I
do not know what the Attorney General's Office did with the
documents," Togar told reporters.
Police are not able to question Setya without prior consent of
President Habibie because of his legislative position.
(rei/01/ylt)