Manulife fiasco instigates high-level talks

Manulife fiasco instigates high-level talks

The Jakarta Post, Jakarta

The intensifying legal battle between Canadian insurance company
Manulife Financial Corp., and its former Indonesian partner the
Gondokusumo family has once again triggered high-level talks
between the Indonesian and Canadian governments amid fears the
case could strain relations between the two countries.

On Wednesday, Minister of Finance Boediono said that Canada's
Deputy Prime Minister and Finance Minister John Manley had phoned
him to express concern about the case.

However, Boediono said the government could not intervene in
the ongoing legal process despite concerns expressed by Canadian
authorities.

"We have explained this to the Canadian ambassador to
Indonesia and to other Canadian officials," Boediono said.

"I hope this case won't hurt ties between the two countries."

Earlier on Tuesday, Vice President Hamzah Haz also stressed
that the government would not interfere in the judicial process,
and urged all parties to respect the law.

Canada is a member of the Consultative Group on Indonesia
(CGI), which groups Indonesia's traditional donors.

The Commercial Court ruled Manulife's local insurance unit PT
Asuransi Jiwa Manulife Indonesia (AJMI) bankrupt after a receiver
of PT Dharmala Sakti Sejahtera (DSS) filed a lawsuit over unpaid
dividend in 1999.

AJMI has filed an appeal with the Supreme Court.

The bankruptcy ruling was made despite the fact that AJMI is
financially sound, as also admitted by the finance ministry.

Manulife has been locked in a legal battle with the
Gondokusumo family, the founder of DSS, for nearly two years
since it acquired the latter's 40 percent stake in AJMI in 2000
through a government auction. The purchase was immediately
contested by a British Virgin Island-registered company, which
Manulife said was a front set up by the Gondokusumo family.

There have been accusations that the Gondokusumo family has
been trying to defraud Manulife.

There have been fears that the Manulife case would further
discourage foreign investors from entering the country as it
strengthens the perception of legal uncertainty here.

The World Bank's commercial arm, the International Finance
Corp., has also expressed alarm about the ruling and its likely
impact on investment in Indonesia. IFC is also a shareholder at
AJMI.