Kalla fends off attack from government agency

Kalla fends off attack from government agency

The Jakarta Post, Jakarta

Jusuf Kalla, the running mate for the presidential frontrunner,
was unperturbed by report released this week by the Supreme Audit
Agency (BPK), which states that his family's company, PT Hadji
Kalla, offered high-risk investment instruments to state social
security firm PT Jamsostek.

According to the BPK report, Jamsostek's investment in medium-
term notes (MTNs) issued by PT Hadji Kalla had a high risk of
default due to several irregular factors during the issuing
process.

Kalla, the running mate of Democratic Party presidential
candidate Susilo Bambang Yudhoyono, told The Jakarta Post that
there were no irregularities during the issue, and that his
company had already redeemed half of the MTNs purchased by
Jamsostek.

"We have bought back 50 percent of the MTNs. We can redeem the
remaining right now even though the maturation period is still a
way off. So I don't see the problem," stated Kalla after visiting
the As-Syafi'iyah Islamic boarding school in Jakarta on Thursday.

Questions about the MTN apparently began when PT Hadji Kalla
issued a four-year Rp 200 billion note to Jamsostek in April 2002
in a bid to raise cash to help finance the purchase of a company
called PT Bukaka Telekomindo International (BTI) from publicly
listed PT Bukaka Teknik Utama (BTU).

However, BPK's 2003 first semester audit report shows that
Jamsostek had not applied "prudent" measures before deciding to
buy the MTN, as the agency later found out that the MTN contained
several problems that may cause it to lose money.

As a state company, Jamsostek is subject to be audited by the
BPK. Previous press reports suggested that Jamsostek had often
been used as a "cash cow" by a host of corrupt government
officials.

The BPK audit report said that the collateral for the MTNs, in
the form of land, put forth by PT Hadji Kalla to Jamsostek turned
out to contain legal problems, and could not be immediately
redeemed by Jamsostek if the firm defaulted on the MTNs.

The report also said that there was an excess of Rp 76 billion
funds in the MTN issue, because based on the BPK calculation, the
amount of money needed to acquire BTI was only Rp 124 billion.

The use of the excess funds for other purposes is in violation
of the MTN agreement made between PT Hadji Kalla and Jamsostek,
in which PT Hadji Kalla pledged to use 100 percent of the MTN for
the BTI acquisition, the BPK reported.

Another possible irregularity assumed by the agency was that
there was actually no evidence that PT Hadji Kalla had used the
proceeds from the MTN to acquire BTI, as stated earlier in the
agreement with Jamsostek before issuing the MTN.

The BPK said that it was Green View Offshore Finance Ltd. of
the British Virgin Islands that bought 99 percent of BTI's shares
worth Rp 369 billion from BTU.

In its report, the BPK recommended that Jamsostek seek
clarification and accountability from PT Hadji Kalla over the use
of the MTN, and urged the company to settle all legal matters
affecting its land collateral.

When asked about the above case, Kalla said that it was not a
significant problem, since his company had complied with the MTN
payment schedule.

"The important thing is that we have paid our obligation (MTN
principal and interest) to Jamsostek... You should not ask what
the MTN proceeds are for. You don't have the right to know that,"
said Kalla, who was the coordinating minister for social affairs
when the MTN was issued.

Elsewhere, Jamsostek investment director Samuel Tobing told
the Post that PT Hadji Kalla had indeed paid back 50 percent of
its obligation to Jamsostek.

However, Jamsostek would try to follow up on the BPK report by
asking the company to clarify the use of the MTN proceeds, Samuel
said.

"So far there is no problem with the MTN. But to be prudent we
will try to seek clarification from PT Hadji Kalla over the use
of the MTN (proceeds)," he said.

Jamsostek has some Rp 27 trillion in investible funds obtained
from the pension funds of more than 22 million workers and
110,726 companies nationwide.