Solution to the BLBI case
The Bank Indonesia Liquidity Support Loan (BLBI) case has become an issue of public concern in Indonesia since May 1999, after the Supreme Audit Agency (BPK) audited the flow of BLBI funds to banks. Since then, there have been two investigations into the BLBI, which have come up with different interpretations.
First, the working committee of the House of Representatives (DPR) concluded in August 2000 that the BLBI was government policy. The case started with the conversion of local banks' negative balances in Bank Indonesia (BI), which were then converted into special money market securities in 1997. Banks with negative bank balances were still allowed to participate in clearing.
BI's policy was based on a presidential directive issued in April 1997, which was against the closure of banks until the People's Consultative Assembly (MPR) ended its meeting in April 1998. The directive called on BI not to take steps that could spark social and political upheaval.
Given the above directive, a Cabinet meeting on Sept. 3, 1997 decided: 1) the granting of liquidity assistance to sound banks; 2) the merger or acquisition of really unsound banks. If, with those options, the banks failed to make amends, they would be liquidated. The Cabinet's decision covered BLBI after September 1997.
Second, banks receiving BLBI funds after the outbreak of the monetary crisis in 1997 have allegedly abused the funds. The police and the Attorney General's Office have investigated the case. Of course it is not so easy to settle the BLBI case through the court, because, politically, BI directors just followed government policy based on presidential directives given in the form of oral statements.
If the presidential instruction on the BLBI is legitimate and authentic, the lawsuit of the BLBI case should be suspended and investigation into the case should be restarted.
There must be no more impression that prosecutors are only pursuing BI directors in tackling the BLBI case, while BLBI recipients (bank owners) remain free from political pressure and legal prosecution. It is necessary to ask experts to examine whether implementing the BLBI policy amid the monetary crisis is an appropriate step.
SERVAS PANDUR
Jakarta