WB threatens to withhold aid

JAKARTA (JP): The World Bank threatened on Tuesday to halt funding for Indonesia if the investigation into the Bank Bali scandal was not concluded swiftly and satisfactorily.

World Bank country director for Indonesia Mark Baird said that given the magnitude of the case, it was not enough for the World Bank to simply express concern over the alleged fraud.

"If this case is not resolved satisfactorily, it will be difficult for us to provide budgetary support to the government of Indonesia," he said on the sidelines of a seminar on the capital market.

The administration of President B.J. Habibie has been under pressure to resolve the "illegal" transfer of Rp 546 billion (almost US$80 million at current rates) from Bank Bali to PT Era Giat Prima (EGP), a private company linked to several of Habibie's associates.

Several ministers and Habibie's younger brother are also alleged to be involved in the scandal.

Although the money has been returned to Bank Bali, there are still demands that all those involved in the scandal be legally processed because a crime may have been committed.

The International Monetary Fund (IMF) earlier called on the government to allow Australia-based PricewaterhouseCoopers to audit Bank Indonesia in an attempt to trace the flow of the funds from Bank Bali, in an effort to identify those involved in the case.

The government earlier appointed PricewaterhouseCoopers to audit the Indonesian Bank Restructuring Agency (IBRA).

Although government and central bank officials welcomed the IMF's proposal, Bank Indonesia Governor Sjahril Sabirin said on Tuesday that according to the new Central Bank Law, only the Supreme Audit Agency (BPK) had the right to audit the central bank.

Sjahril said PricewaterhouseCoopers could audit the central bank only with the prior consent of BPK, or if the House of Representatives demanded that BPK seek the assistance of an independent auditor.

Sjahril was speaking to reporters before meeting with Habibie at the State Palace.

BPK is chaired by Satrio B. Yudono, another Habibie loyalist.

However, Sjahril said after the meeting it was best if BPK involved Pricewaterhousecoopers in the auditing process.

Major opposition political parties warned the public on Monday to be on guard for a possible compromise agreement between the House and the government to settle the high-profile scandal.

World Bank vice president for East Asia and the Pacific Jean- Michel Severino said in a speech at an international capital market conference that the World Bank remained deeply concerned over the Bank Bali affair and its broader implications for Indonesia's bank restructuring efforts.

"I welcome the preliminary steps taken thus far, including the return of the funds and the initiation of an independent audit. But I urge that the process be completed as quickly and transparently as possible, that details of the case be explained to the public and that any wrongdoers be subject to the full force of the law.

"This matter needs to be resolved, not only because of the large sums of money involved, but also because of the greater confidence and credibility issues at stake," Severino said.

Severino and IMF Asia Pacific director Hubert Neiss, who arrived in Jakarta late on Tuesday, are expected to meet with the government on Wednesday to push for a satisfactory resolution of the Bank Bali case.

The scandal has threatened the credibility of the government's bank restructuring program by damaging confidence in banking authorities and the banking community.

Bank Bali should not have used EGP to recoup its interbank claims because the claims were assured by IBRA through the government's blanket guarantee program.

There is suspicion among legislators that Minister of Finance Bambang Subianto and IBRA chairman Glenn S. Yusuf played a role in forcing Bank Bali to pay EGP the commission for helping the bank recoup its interbank claims on liquidated Bank Dagang Negara Indonesia (BDNI).

Many analysts and political leaders, including those from the popular Indonesian Democratic Party of Struggle (PDI Perjuangan), have accused ministers and members of Habibie's inner circle, including his brother, of being involved in the case which has now become a political scandal.

The Habibie loyalists have been accused of seeking to raise money to secure Habibie's victory in the November presidential election.

Publicly listed Bank Bali is currently under the management of U.K.-based Standard Chartered Bank, which has committed to buy a 20 percent stake in Bank Bali in October through a rights issue. The government will be the standby purchaser of the remaining 80 percent stake in a bid to recapitalize the bank.

Meanwhile, Jakarta Stock Exchange president Mas Achmad Daniri dismissed on Tuesday rumors that the suspension of trading of Bank Bali shares would eventually lead to the bank's delisting from the exchange.

Trading on Bank Bali has been suspended since the scandal broke two weeks ago.

Daniri said trading of Bank Bali shares would resume once the case was resolved.

In a related development, IBRA deputy chairman Pande Lubis, who is suspected of involvement in the Bank Bali scandal, snapped at photographers who were attempting to take his picture on Tuesday.

"This is the only way for you to earn a living," he asked photographers after answering questions at National Police Headquarters. (rei/udi/ylt/prb)