Soeharto 'intervened in Texmaco loan'

Soeharto 'intervened in Texmaco loan'

JAKARTA (JP): Onetime Bank Indonesia governor Soedradjad
Djiwandono admitted late Tuesday that former president Soeharto
intervened in the disbursement of the central bank's preshipment
trade facilities to exporters, including the giant textile and
engineering Texmaco Group.

But Soedradjad said Soeharto's intervention was unavoidable at
the time because the country was hurtling into its worst economic
crisis in 30 years.

"The national leader was like a CEO in a time of crisis, so
everybody was turning to the president," he told the House
Commission IX for the budget and banking at a special hearing on
the Texmaco scandal.

"(In the crisis) the involvement of the president was greater
than usual... during a crisis, speed is of the essence."

Soedradjad, currently a development associate at the Harvard
Institute for International Development in Boston, flew in to
testify at the request of the House.

Also attending the hearing were Bank Indonesia Governor
Sjahril Sabirin, Bank Indonesia deputy governors Miranda Goeltom
and Achjar Iljas and Bank Negara Indonesia president Widigdo
Sukarman.

The central bank's preshipment trade facility, which was
provided between November 1997 and February 1998, became an issue
of controversy last week after Minister of Investment Laksamana
Sukardi revealed to the House that Texmaco was involved in
"national level collusion" with Soeharto in the disbursement of
US$754.1 million and Rp 1.9 trillion, mostly in the trade
facility from the central bank and largely through state Bank
Negara Indonesia.

"Once Texmaco approached Bank Indonesia, the president's
intervention was felt," said Soedradjad.

He explained that the central bank was powerless to reject
Soeharto's intervention because Bank Indonesia had yet to become
the independent institution it is today.

"Bank Indonesia's governor was then a member of the Cabinet
and was fully answerable to the president," he said.

Bank Indonesia obtained its independent status based on a new
central bank law in May.

Sjahril argued that it should not be considered intervention,
but rather an instruction from the president to a Cabinet member.

"It is difficult to categorize it as intervention, but it is
more appropriate to see it as an instruction because (according
to the previous law) Bank Indonesia had a duty to implement the
policy designed by the government."

Soedradjad explained that the central bank's preshipment trade
facility was launched by the government because the monetary
crisis that started in August 1997 was spreading and adversely
affecting the real sector.

He said action was urgently needed to help the real sector,
particularly small scale businesses and exporters of non-oil and
gas products.

"At that time, there was a severe shortage of liquidity and no
one had foreign exchange, except the central bank," he said,
pointing out that even Bank Indonesia's gross foreign exchange
reserves fell US$4.5 billion to $24.07 billion in five months
through November 1997.

"Because of the urgency of the situation, there was a need to
introduce a preshipment trade facility," Soedradjad said.

Bank Indonesia only provided a postshipment trade facility
before the crisis.

"Since September 1997, there was a strong demand from the real
sector for the central bank to provide credit," Soedradjad said.

Soedradjad said that the trade facility was deemed necessary
to revive the real sector.

The facility was designed together with the minister of
finance and the minister of trade and industry, he said, adding
that it was the then minister of trade and industry, Tunky
Ariwibowo, who selected exporters eligible for the trade
facility.

But he said the executing banks were responsible for
appraising the credit soundness of the prospective recipients.

Sjahril said Bank Indonesia provided $554.1 million plus Rp
1.8 trillion in the preshipment trade facility to 20 exporters,
including Texmaco, via seven executing banks.

He did not explain the discrepancy in figures, as Texmaco
alone is alleged to have received more than $754 million.

Sjahril said that recipients of the trade facility were
limited due to various reasons.

He said not many companies could meet the requirements, the
executing banks bore high commercial risks and many banks were in
financial distress.

Sjahril did not name the other recipients of the facility.

He said that of the preshipment trade facility provided via
Bank BNI, $470 million had not been repaid by the bank to the
central bank.

"Installments on the remaining $470 million are projected to
be completed by the end of 2000," he said.

Meanwhile, Bank BNI president Wididgo Soekarman said that the
bank and Texmaco were working on a debt restructuring package,
including through a debt to equity swap.

Wididgo said the debt restructuring was a prerequisite for BNI
to obtain recapitalization funds from the government which were
estimated at more than Rp 52.5 trillion. (rei)