Megawati defends 'release and discharge' policy

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.