Shake-up at IBRA

Shake-up at IBRA

Firing the second-highest executive of the agency that holds
the key to Indonesia's economic recovery while he was overseas
leading a road show to attract investors was the last thing
President Abdurrahman Wahid needed to do to improve the
credibility of his economic crisis-management system. The
President's abrupt decision last week to replace Arwin Rasyid as
vice chairman of the Indonesian Bank Restructuring Agency will
only strengthen the market's perception that his management
system is erratic, at best.

The timing and unclear reasons for the dismissal of Arwin
after only about 10 months in his position, and strong rumors of
the imminent replacement of Cacuk Sudarijanto as IBRA chairman,
though weakly denied by the President's spokesman Wimar Witoelar
on Monday, will only cause more damage to the working spirit at
the agency.

We thought the political struggle for control of IBRA, which
holds more than Rp 600 trillion (US$68.2 billion) in state
assets, or as much as 40 percent of gross domestic product, ended
when Abdurrahman moved last November to make the agency
answerable only to him. But the top management at IBRA seems to
remain highly vulnerable to squabbles within the political elite.

Bambang Subianto, the first chairman of the agency that was
set up by then president Soeharto in late January 1998, served
for only about two months. Bambang Subianto's successor, Iwan R.
Prawiranata, survived for approximately three months. The third
chairman, Glenn M. Yusuf, served the longest tenure, weathering a
turbulent 18 months. Cacuk, whose status is now highly uncertain,
was appointed only last December.

Such instability and discontinuity in the top management is
devastating to the capability of the agency to carry out its
vital role of helping to lead the nation out of the economic
crisis.

IBRA's tasks of salvaging the banking industry, resolving the
huge corporate debt overhang and restructuring the paralyzed
business sector requires not only strong leadership, but also
some sort of continuity in management. Debt restructuring is a
complex, time-consuming process.

How can IBRA management develop strong leadership if its key
executives can be replaced anytime, without clear reason? If this
tendency continues, key officials, who by the nature of their
jobs will always face temptations from big debtors to "collude or
corrupt", could opt for the easy way out, acting in very short-
term interests at the expense of the national economy.

True, IBRA's performance is still way below expectations. Its
bank and debt restructuring programs have always been far behind
schedule and its asset recovery has always been far short of the
targets. Its latest debt restructuring deals, involving more than
$3.7 billion owed by four conglomerates, exploded into a
controversy that spooked the international market and
multilateral agencies, and could become a hot potato for
Indonesia's delegation at the meeting of the Consultative Group
on Indonesia creditor consortium in Tokyo beginning on Tuesday.

It is, however, not fair to pin all of the blame for this
subpar performance on IBRA management. In addition to the
instability of its management in the first seven months of its
operations, the agency has been held hostage to political battles
between various influential groups.

Abdurrahman's move to put IBRA directly under his control was
initially hailed as the right step to protect the agency from
vested political interests and to gradually develop it into an
independent institution, able to perform freely its functions.
But the President's latest tinkering with its top management once
again proves how chaotic has been Abdurrahman's economic-
management system.

Letting IBRA drift much longer will derail the nascent
economic recovery. It is therefore imperative that the House of
Representatives ask for the government's accountability regarding
the agency. We are also utterly disappointed with the Oversight
Committee of IBRA, which seems to serve only as a perfunctory
body. The committee, consisting of independent experts under the
leadership of Mar'ie Muhammad, a former finance minister who was
known as "Mr. Clean" during the corrupt Soeharto regime, should
be more assertive in exercising its authority, acting quickly and
firmly to enforce the long-delayed good governance system at the
agency.