Teaching devious business tycoons a lesson

Widodo Dwi Putro, Institute for Social and Economic Research, Education and Information (LP3S), Jakarta

Debtors formerly owning or managing banks have yet to return hundreds of trillions of rupiah of state funds that they obtained on loan. Originally, problem banks obtained this money under the Bank of Indonesia Liquidity Support (BLBI) program, a loan scheme intended to set them free from the squeeze of the monetary crisis. What has happened, however, is a breach of promise and trickery. These debtors have become smarter, more cunning in evading their debt responsibilities. Quite a few of them have gone abroad while many others have all of a sudden become ill or destitute.

The attitude of these debtors reflects the Dutch saying "hoe grote geest, hoe groter beest", the smarter someone is -- in the context of a business tycoon, the richer he is -- the beastlier he will become.

Bad debts would never have occurred if the government's policy did not excessively pamper business tycoons. The case of these bad debts would not have been protracted if law enforcement institutions had from the very beginning -- i.e. when the loans were channeled -- considered bad debtors and parties extending the loans as criminals.

Those involved in loan channeling -- be they direct perpetrators, the parties asking the loans to be channeled or those persuading or abetting the channeling of the credits -- must be prosecuted because the loans extended to these debtors exceeded the credit ceiling (BPMK) permitted by virtue of Law No. 10/1998 on the principles of banking affairs. A criminal investigation into this case can be conducted even if there is no complaint from the Indonesian Bank Restructuring Agency (IBRA). IBRA's decision to postpone any legal action against bad debtors for three months is irrelevant in the criminal proceedings of the case.

In addition, as a civil case, it carries a penalty which is no less severe than the punishment demanded when the case is considered a criminal one. Supreme Court Regulation No. 1/2000 carries the penalty of imprisonment for debt in the case of defaulting big-wig debtors. So, ill-meaning debtors can then be incarcerated in state penitentiary set by the relevant court of law and forced to meet their obligations. Prison terms for this crime are for six months and can be renewed every six months for a maximum of three years.

Some circles, however, have objected to the imposition of this imprisonment-for-debt penalty, arguing that in a civil case a penalty like this is tantamount to a human rights violation. This argumentation is lame as the imprisonment-for-debt penalty stipulated in Supreme Court Regulation No. 1/2000 is quite different from the instrument of hostage-taking regulated in Articles 209 and 224 of the Criminal Code.

The difference is that by virtue of the Supreme Court regulation, the penalty is imposed on financially capable debtors who refuse to pay their debts. This is confirmed in Article 4 of Supreme Court Regulation No. 1/2000, which stipulates that imprisonment-for-debt will only be imposed on "big-wig" debtors sustaining debts of no less than Rp 1 billion.

Therefore, it is irrelevant to claim the imprisonment-for-debt instrument is against human rights because it is these business tycoons who have really violated human rights by refusing to pay back their debts. This refusal has damaged the state's economy, inflicting greater losses than the purported violation of a person's human rights when they are subjected to imprisonment for debt. Besides, these delinquent debtors feast upon the state's funds or, more accurately, they can be considered as having looted the public's money.

Since the Supreme Court issued its imprisonment-for-debt regulation, there has not been a single bad debtor subjected to this penalty. It is often the case that efforts to apply the imprisonment-for-debt stipulation on a bad debtor often fail at court.

Take, for example, the Gondokusumo family of the Darmala Group. DeMat Investment (a subsidiary of Darmala), has borrowed US$13 million from Danamon Bank. They could actually settle their debts but, unfortunately, have been totally non-cooperative. So, IBRA filed a request to the South Jakarta District Court, requesting the court hand out prison sentences to five members of the Gondokusumo family. However, the request could not be granted by the council of judges on the grounds that the evidence presented was not in order.

Another example also occurred at South Jakarta District Court, which rejected a request for imprisonment for debt as made by the IBRA against one of the giant debtors, Wellwin Finance (HK) Limited (Ongko Group). In fact, the debtors admitted sustaining a debt to the state totaling Rp 270 billion, an amount of money that is too large for them to pay back. Of course, this failure of IBRA to impose prison sentences on bad debtors has not only disadvantaged the state but also the entire Indonesian people, who are currently enduring an acute economic crisis.

The public can actually play a significant role as a pressure group without having to violate the law. They can creatively take a position as part of the legal culture by urging business tycoons to comply with the law.

By comparison, in countries where people enjoy a high level of legal consciousness, irresponsible business tycoons are ostracized and are not easily able to have long-term relationships with other businessmen. A good example is what happened in the Philippines, where the public once boycotted a beverage product because they believed the producer had inflicted huge losses to the people and the state.