On a scapegoat

On a scapegoat

In reference to an article in the Dec. 17 edition of Kompas
titled Jangan mencari kambing hitam (Don't look for a scapegoat),
I was quite shocked that Econit director Arif Arryman did not
analyze the root cause of our economic crisis.

The gist of the matter is essentially accountability and the
shouldering of the consequences of one's own actions.

It may be that Mr. Arif Arryman has become a "victim" of our
system as everything has become blurred. It is not clear who is
responsible for the turmoil.

But it is obvious that private businesses have taken large
offshore loans, while there was no transparency regarding this.
Many cannot repay these debts as they mature, and it seems that
the rollover of the debts is not likely.

This is their own business and not the responsibility of the
minister of finance or the governor of Bank Indonesia. Bankruptcy
is bankruptcy -- that is the rule of the market game.

Businesses also had generally engaged in marking-up their
projects. This practice made businesses here unsound and unable
to compete.

Why did the government abandon the foreign exchange band
rather than subjecting it to regulation last July under the
pretext of "free market forces" determining the exchange rate of
the U.S. dollar against rupiah? If our business tycoons have made
mistakes in their business calculations -- a risk that every
businessperson has to take -- then why must they be helped by
begging for aid?

Another factor that has engulfed us into this crisis is that
our banking regulators, since governor Mooy and finance minister
Sumarlin were in office, have been too generous with the issuance
of banking licenses. It seems now that it is just like acquiring
a driver's license in that one simply buys it -- much like an
incompetent driver who is free to put public passengers at risk
once he has payed a fee for the license to drive a bus.

Many banks only came into existence to meet the needs of their
creators' own group. Loans flowed into subsidiaries and it was
obvious that even in the case of Summa Bank, the bad practices
were not enough to prompt Bank Indonesia to enforce the
regulations (particularly with respect to the legal lending
limits). In this case, the brake (regulatory authorities) failed
to work on the bus (bank), therefore claiming victims.

Now, if the rules of the game were clear, companies which are
unable to repay their debts must be taken over by their
creditors. Afterwards it would have to be decided whether the
companies would be closed down, trimmed or split into smaller
units.

It is clear that those affected in these cases would be the
shareholders, creditors and the employees.

But the case stops there.

If Indonesia refuses to find ways to repay the loans in U.S.
dollars, then Standard and Poor's country rating for Indonesia
would be lowered.

Even Japan is now in confusion in the face of the crisis which
may hit their banks (which actually should have gone bankrupt).

But the government should leave this matter to the market, as
described above.

Finally, the result of the handout line will be zero: no
parties are interested in rolling over our debts. And the
"scapegoats" are the businesspeople who cannot pay back their
debts. It is as simple as that.

It is normal that goats will try to find a herdsman who can
save them. This simply shows that goats are not the same as
gentlemen who should be ready to bear the consequence of their
own actions.

Y. SANTO

Jakarta