WB threatens to withhold aid

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)