Megawati defends 'release and discharge' policy

The Jakarta Post, Jakarta

President Megawati Soekarnoputri defended a controversial policy of exonerating a number of former bank owners of past banking crimes, saying the move was a necessary part of efforts immediately to resolve the huge debts owed by the bankers to the state.

In a year-end speech late on Tuesday, the President said that without immediate action, the protracted debt problem could trigger difficulties in "other areas" and make these difficulties more complicated to resolve.

She said the "release and discharge" policy was part of a scheme agreed to with the International Monetary Fund and was in line with guidelines established by the People's Consultative Assembly and existing laws.

"We can't let this problem drag on. That's why in December I ordered a thorough resolution, while at the same time providing legal guarantees for debtors who have settled their obligations ... ," Megawati said.

The government, in a recent Cabinet meeting, approved a much- criticized policy of the past administration of exonerating ex- bank owners who have been judged cooperative in settling their debts to the state.

A presidential directive on the release and discharge of the cooperative former bank owners will be issued soon.

The former bank owners, among the country's richest businesspeople during the economic boom of the early 1990s, became indebted to the state after their banks received some Rp 144.5 trillion (about US$16 billion) in government liquidity loans to help the banks stay afloat in the wake of the late 1990s financial crisis.

A report from the Supreme Audit Agency said most of the liquidity loans were misused by bank owners. Many of the businessmen also have been accused of breaching the bank legal lending limit by channeling most of their banks' money into affiliated businesses, which contributed to the devastating financial crisis.

Four years ago, the Indonesian Bank Restructuring Agency, which is mandated to collect the debts, announced a policy that would clear the indebted businessmen of their banking crimes if they fully repaid their debts.

The policy has been strongly criticized by many parties who say it violates the people's sense of justice.

After four years, none of the former bank owners have fully repaid their debts. Assets surrendered by the ex-bank owners have proven insufficient to cover the debts in full, as many of the assets have deteriorated in value.

This will force tax payers to shoulder a greater burden in paying the costs of the economic crisis.

Several businesspeople have been identified as qualifying for the release and discharge status, including Sudwikatmono, Ibrahim Risjad, The Nin King, Hendra Liem and Sudono Salim. The latter is the former owner of Bank BCA and the largest debtor.

Under this new debt settlement program, those former bank owners deemed uncooperative in settling their debts will face legal sanction.