The difficulties in taking white-collar crooks to court

The government recently revealed a major dilemma in taking financial lawbreakers to court. Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said the country could fare even worse if all offenders were jailed and were unable to do business. The Jakarta Post Gadjah Mada University economist Sri Adiningsih about the issue. The following are excerpts of the interview:

Question: The government faces a dilemma not only over the Texmaco case but, as revealed by minister Kwik Kian Gie, because there are allegedly 12 other similar cases. Your comment?

Answer: The government has asserted it will apply good governance and firm law enforcement to create a new Indonesia free of corruption. In banking restructuring it is also expected that corruption and political deviation must be eradicated. However, in wiping out corruption the government must take a balanced and careful perspective on corruption cases like the Texmaco case in order to prevent counterproductive effects in the economy's recovery. We surely don't want law enforcement hampering economic recovery.

This actually is a problematic job for the government. While the government has no choice but to uphold the law, it has to strive to prevent further constraints in business activities.

The corporations under legal proceedings should be prevented from going under because it is the owners or managers who should be sanctioned.

I am worried that many businesses here will face problems while our economic future is already rife with obstacles. The government must be careful against generalizing corruption.

What do you mean by this?

Not all bad credits for large amounts should be considered to contain deviations, collusive factors etc.; there are also bad debts largely because of the economy's condition, which hampered businesses. Bad credits detected containing collusive actions must also be reexamined (to see) whether such deviations were really intentional. Further, (it must be checked) whether it was carried out by the owner, the management, the bank, rulers or bank supervisors. Each case must be carefully appraised.

Would you say the Texmaco case is purely one of corruption or collusion?

I agree that the Texmaco case should be legally processed to prove whether such a deviation existed. I agree that all parties who conduct business anomalies should be legally processed, but not to the extent that the business itself is hurt and its largely innocent employees affected.

If deviations are proven the sanction must be really localized to those who are responsible, and the tens of thousands of Texmaco employees should be prevented from carrying the burden of just a few people's deviant actions.

If it was true what Pak Kwik said about 12 other similar cases, then preventing a new potential social problem of the huge number of employees involved is a must. If not all bad debt cases are collusive practices, what are they? I think the means involved are similar -- utilizing funds from banks for their own business group members. Remember that such practices have not only involved state-run banks but also private ones. While currently, almost all banks, mainly the large ones, are owned by the state, which will eventually suffer the loss from the bad debts.

What I want to say here is that deviations by corporations and private banks bring losses to the state and the people.

So action must be taken against all those proved to have violated banking regulations and those involved in collusion with officials.

President Abdurrahman Wahid and minister Kwik implied that only cases which were excessive in their violations would be processed, while those on a smaller scale would be forgiven as long as they did not repeat their conduct. Is that fitting of the government? Once again, this is very difficult for the government, particularly in cases involving the provision of large debts in the past which had no links to rulers, supervisors, regulators and other such parties. We also realize that Indonesia in the past was highly corrupt, so it would not be easy to find a business which was completely free of corruption, collusion and nepotism (locally known as KKN).

So of course attempts to disclose KKN in the provision of credits or businesses would make waves in society. Deviations involving very large amounts, more so those with very large company assets, would affect a wide range of parties each wanting to save their own interests.

As in the Texmaco case, the minute it was revealed, a controversy ensued from many sources. So if there are a dozen cases like Texmaco, or more which are exposed to the public, the parties involved will increase, plus those with indirect interests.

Cases like this definitely need sound handling, or it could produce not only a disruption but shock waves. Wasn't the atmosphere collusive in the past? We were indeed among the most corrupt countries and now we wish to correct ourselves. All such misconduct must be punished if the perpetrators have brought losses to the state and the public. It would be unfair to let them rest. The problem is how we can select problems so that we can recover state funds and try not to disrupt business too much. Everything has its trade off. Disadvantages and benefits should be expected from firm law enforcement. Even though criminal and civil laws have been violated, to minimize unwanted effects, the handling of such cases should be proportional, not emotional. Would the International Monetary Fund (IMF) be able to accept that the government must be cautious and cannot act in one move against cases of bad debt and bank deviations? I think it can be accepted because it is rational. We cannot say for sure that people or businesses with large bad debts have conducted deviations or collusion. I think the IMF could understand that. But the important thing is that the government has goodwill to motivate healthy business performance and tries its best to settle all misconduct. Would the sum of bad credit mentioned by Pak Kwik -- Rp 600 trillion or about three times our national budget plan -- be realistic? I think Pak Kwik had inside information. Some people claim the disclosure of the Texmaco case was politically motivated, or was taken for political revenge, because State Minister of Investment and State Enterprises Laksamana Sukardi who revealed it is from the Indonesian Democratic Party of Struggle (PDI Perjuangan), while some of those in Texmaco were cronies in the former regime. I would say everyone has political and economic interests to seek positions, that's normal. But what is important here is whether those interests are in conflict with the national interest, which is to recover Indonesia's economy.

If there was an interest behind the Texmaco revelation, I would support it if it was in line with the wider national interest.

We are ... restructuring banking. We hope this costly program succeeds, so that the recapitalized banks can become healthy and efficient banks. In this context the banks' bad credit must be soundly managed and should not pose a problem to the future banking world. In this case we also have to save state funds.

I think the disclosure of the Texmaco scandal was positive and it must be continued, regardless of the interests of certain groups ... I think the accusation of political motives behind the revelation is out of place. How much of the lost funds do you think can be retrieved from the bad debts?

I can't say for sure. But the Indonesian Bank Restructuring Agency (IBRA) says assets under its authority will increase by 30 percent, so I think this is quite a high figure already. I even think that (retrieval of that) amount would have to involve a lot of hard work.

All this depends on the condition of the macroeconomy. And if the value of assets under IBRA increases this will improve the condition of companies under IBRA's management.

What is also important is that to increase IBRA's recovery rate a correct mechanism should be found so that companies under its management improve their performance. Problematic business owners and managers must be responsible; like it or not they must try to replace the funds they have abused after legal proceedings are completed. If a problematic debtor is found to have used his credit for a project other than what was mentioned in his proposal, he should be forced to return the funds to the state. Firm law enforcement must be applied. (Asip A. Hasani)