Manulife case settlement urged

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)