Writing on the wall

Writing on the wall

President B.J. Habibie's staunch supporters may understandably
take International Monetary Fund (IMF) and World Bank pressure
for a speedy and satisfactory resolution of the Bank Bali scandal
as a game of power politics, capitalizing on the case to damage
Habibie's chances in the November presidential election. To many
politicians and businessmen long acquainted with the old system
of patronage-based business, IMF Asia-Pacific director Hubert
Neiss' warning of impending disaster and World Bank vice
president for Asia and the Pacific Jean-Michel Severino's threat
that aid to Indonesia could be discontinued may also come across
as an exaggeration of what appears to them simply a normal
business transaction or a shady, yet legal, business deal, at the
worst.

However, non-governmental organizations see the stance of the
two multilateral institutions as still too soft as it appears to
ignore the political dimension of what is now notoriously known
as Baligate. The International NGO Forum on Indonesian
Development seems to expect the two agencies to strengthen and
broaden their demand for direct investigations into all
politicians, Cabinet ministers and close associates of President
B.J. Habibie implicated in the case with an apparent hope that
the end-game would finally hit Habibie himself.

The NGO demand once again demonstrates how civic organizations
have entirely lost trust in the current government, including the
legislative and judicial branches, and how they pin such great
hope on the two multilateral agencies to bring their financial
leverage to bear on the government, hitting at its most weakest
part -- the state budget.

One cannot blame the NGOs for such a cynical attitude. After
noticing how the Habibie administration has stalled for more than
one year in regard to the investigations into former president
Soeharto and his cronies, how could one expect Habibie to act
firmly and quickly on the Bank Bali scandal, in which some of his
trusted aides have been implicated?

Yet it is too early to speculate whether the Bank Bali case
will be declared closed after the prosecution of some sacrificial
lambs. But judging from the uproar at the House of
Representatives, persistent outcry in the mass media and harsh
criticisms by major political parties, in addition to the threats
by the two multilateral agencies, we are not yet so pessimistic,
even though it is now almost one month after the high-profile
scandal was first disclosed to the public.

The IMF and the World Bank are strongly demanding that the
findings of the investigations by independent auditors
PricewaterhouseCoopers be fully disclosed to the public and that
all those found to be involved in the scandal be brought to
court. Compared to their usually subtle warnings of the past, the
two institutions appear to mean business this time.

The magnitude of Baligate is such that Neiss' warning of a
worse-case scenario is not an overblown statement of the likely
devastating impact of the case. First of all, the scandal is
seriously threatening to subvert the World Bank and IMF-led
multibillion dollar bailout program. Aid suspension by the two
agencies, which set opinion for all other foreign donors, would
most likely lead to the withdrawal of most international support
for the country.

Baligate has damaged the economy, as can be seen in the
weakening rupiah, and has tarnished the image of President
Habibie, as demonstrated by the mounting public demand for his
resignation.

Those who tend to underestimate the impact of the scandal and
try at all costs to sideline it simply as an ordinary criminal
and civil case seem to be oblivious to the blunt fact that
Baligate is actually a window on how appalling is the actual
state of private and public sector governance. That such a huge,
blatant embezzlement of state funds occurred after the economy
hit rock bottom shows that very little has changed.

The scandal once again laid bare all sorts of bad public and
corporate governance, loudly proclaiming that corruption,
collusion and nepotism -- the underlying causes of the economic
crisis -- remain the hallmarks of the government and the private
sector. A government with such characteristics obviously cannot
survive much longer. A worsening economic condition would bring
such a bad government down, as it did with the Soeharto regime,
since it is the framework of laws, rules, ethics and code of
conduct that is the most crucial determinant of a country's
economic progress and its degree of social cohesion and decency.