Manulife case settlement urged

JAKARTA (JP): Indonesia's main international donors expressed deep concern over recent commercial court rulings, particularly the so-called Manulife case, at the end of a two-day meeting with the government here on Tuesday.

World Bank country director for Indonesia Mark Baird said that the donors had urged the government to immediately resolve the cases, and press ahead with further legal and judicial reforms to help win back dwindling investor confidence.

"There has been concern over a number of recent court cases which have affected investment sentiment," Baird said at a brief press conference at the end of the Consultative Group on Indonesia (CGI) interim meeting held at the finance ministry.

Indonesia's chief economics minister Rizal Ramli appealed to the donors to quickly disburse promised aid to ease the budget deficit.

"We are appealing to our development partners to disburse committed funds to alleviate our budget burden," Ramli said.

The CGI groups the country's traditional multilateral and sovereign donors, of which the largest are the World Bank, Asian Development Bank, and Japan.

The interim meeting was not designed to make any loan pledge, but to review the implementation of the reform program promised by the government at last October's CGI meeting in Tokyo, during which the donors pledged around US$4.8 billion in loans to help finance the 2001 state budget.

The next full CGI meeting is scheduled to take place in October in Yogyakarta, to decide on the size of the financial support the creditors will provide Indonesia for the 2002 state budget.

Experts, however, said that failure to implement the agreed reforms, including resolving the controversial Manulife case, might affect the disbursement of the promised $4.8 billion loan and future financial support.

"Let see how it goes in October," said a government official, referring to the upcoming CGI meeting, when asked whether the donors would fully disburse the pledged loans.

Separately, Attorney General Marzuki Darusman told donors that "concerted efforts are now being made to redress this (Manulife case) and several similar cases that were brought to our attention recently."

"This case has brought our law enforcement system into disrepute and reinforced the adverse perception of our legal system," Marzuki said in a speech, a copy of which was distributed to the press.

The high profile Manulife case started when PT Dharmala Sakti Sejahtera (DSS) sold its 40 percent stake in PT Asuransi Jiwa Manulife Indonesia (AJMI) to Canadian insurance company Manufacturer's Life Insurance (Manulife) last year, after DSS was declared bankrupt by a Jakarta commercial court.

AJMI is a joint venture between DSS and Manulife.

But the sale was disputed by British Virgin Islands-based Roman Gold Assets, which claimed to be the rightful owner of Dharmala's 40 percent stake in AJMI. Roman said it had purchased the shares from Hong Kong-based Harvest Hero International Ltd., which sold the shares based on the power of attorney it had been given in a letter signed by DSS owner Suyanto Gondokusumo.

Manulife said Harvest was a paper company established to allow fictitious transactions to take place, but the Police instead detained a senior local Manulife official, who was only released after complaints from the Canadian government.

Sources, however, said on Tuesday that the Police were now moving toward questioning Suyanto over alleged fraud in the Manulife case.

Another similar case involved PT Panca Overseas Finance and its main creditor, International Finance Corporation, a unit of the World Bank.

The Panca case created controversy when the Jakarta Commercial Court rejected the bankruptcy petition presented by IFC. The court instead ratified a debt restructuring program proposed by Panca, after a majority of Panca's creditors backed the restructuring plan.

But IFC appealed the ruling on the grounds that many of the creditors were bogus companies. Panca owes around US$13 million to IFC out of the company's total debt of $235 million.

Elsewhere, Baird said that the other important items on the agenda of the interim CGI meeting were the revision of the 2001 state budget deficit and the forestry issue.

He said that on the forestry issue, Minister of Forestry Marzuki Usman had told donors that the government would intensify measures to curb rampant illegal logging activities in the country, and to move toward the goal of sustainable forest management.

On the state budget issue, the government and the IMF have reached broad agreement over ways to maintain the current state budget deficit at 3.7 percent of gross domestic product (GDP) as initially projected.

The IMF said earlier that the deficit could widen to 6 percent of GDP due to the weakening of the rupiah and rising domestic interest rates unless additional measures were immediately taken.

Finance minister Prijadi Praptosuhardjo told the donors that the government was considering five measures, most notably raising tax and non-tax revenues and cutting down on spending, including on development projects, to achieve the deficit target.

The IMF has just completed two weeks of negotiations with the government, which also had the current state budget as one of the main items on the agenda.

The IMF said that it expected to sign a new reform agreement with the government after the House of Representatives has approved the revised state budget, which approval is expected to be given sometime in mid-May.

The signing of a new agreement would allow the IMF to disburse its third $400 million loan tranche, which was delayed late last year due to signs that the government was wavering in the implementation of reform measures. (rei)