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)