http://www.asiasentinel.com/index.php?option=com_content&task=view&id=2039&Itemid=175
Scandal Threatens Indonesia's Reform Agenda Written by Our Correspondent Friday, 04 September 2009 Two of President Yudhoyono's top reform officials face questions over a bank bailout On the eve of his second term in office, Indonesian President Susilo Bambang Yudhoyono is facing a growing storm that threatens two of his key economic managers as well as his administration's reformist reputation. At risk from questions over a disputed Rp6.76 trillion (US$668.9 million) government bailout of the failed Bank Century last November are Yudhoyono's new vice president, former Central Bank Governor Boediono, as well as the finance minister, Sri Mulyani Indrawati and other Central Bank officials. Indonesia's deposit insurance law protects deposits only up to Rp2 billion (US$119,000) per depositor. Critics charge that the bailout was to help wealthy depositors including Putra Sampoerna, the patriarch of the Sampoerna tobacco concern and one of Indonesia's richest men. Sampoerna sold the tobacco interests to Philip Morris for US$5.4 billion some years ago. The state-owned PT TimahTbk tin mining concern and the state pension fund PT Jamsostek also reportedly were involved in seeking the bailout money, among others. Sri Mulyani, a former International Monetary Fund official who has twice been named Euromoney's Finance Minister of the Year, and Boediono are very much the face of Indonesia's reform movement. The two headed the team that sought to stabilize Bank Century, whose price tag ended up more than five times the amount approved by the Indonesian parliament last year in the vain effort to save it. There are additional questions whether the bailout effort started before the parliament gave approval for it. There were high hopes in the wake of Yudhoyono's convincing win in the July 8 presidential election that the country's political landscape would change, cutting into the power of the old guard which has continued to dominate the country well after the former strongman Suharto fell from power. Boediono and Sri Mulyani were considered very much in the vanguard of that change. It remains to be seen how deeply the two are embroiled in the Bank Century matter. Beyond ordering the central bank, which was headed by Boediono at the time of the bailout, and Sri Mulyani to provide an explanation, Yudhoyono has said he doesn't want to intervene. He was overseas at the time of the bailout decision, officials said. Bank Century, headed by financier Robert Tantular, went under last November amid a run on savings as the global financial crisis dried up liquidity across the world and caused havoc in financial markets. More than 20 mid-sized Indonesian banks were embroiled in liquidity problems at the time. Tantular and owners of major accounts at Bank Century were accused of making massive withdrawals even during the period government officials were attempting to stabilize the bank and after allegations of fraud had been made. Tantular is due to be sentenced Monday on embezzlement charges. So far, the National Police say they have only managed to recover Rp1.19 billion (US$118,000) of the US$19 million they suspect Tantular of making off with. The money, officials said, was seized from several local accounts linked to fraudulent letters of credit issued by Bank Century. Earlier in the year, the police said they suspected Tantular still has $19.25 million hidden overseas, in Hong Kong and Britain. Police are also seeking Rp11.6 trillion is assets belonging to two foreign nationals who were commissioners and shareholders. One is Rafat Ali Rizvi, a British citizen of Pakistani descent, and Hesham al Warraq, of Saudi Arabia. Both are the run. "We don't know their whereabouts, Police Commissioner General Susno Duadji, the head of the criminal investigation department, told reporters in December. " We will pursue them probably to their home countries, England and Saudi Arabia." Concern is growing that Tantular may get off light. Prosecutors have recommended a sentence of eight years and fines of Rp50 billion, less than 1 percent of the Rp6.7 trillion the government spent vainly bailing out his bank. He could have faced up to 15 years in prison and Rp200 billion in fines. "With our corrupt court system and jails, we are worried that the verdict will not serve as an example to prevent similar cases from taking place," Emerson Yuntho, the deputy chairman of Indonesia Corruption Watch, told reporters. On Tuesday, Jusuf Kalla, the outgoing vice president and what amounts to Yudhoyono's economics czar at the time, he hadn't been consulted about the bailout until it had already begun. Sri Mulyani has defended the bailout, saying if it hadn't taken place, the other cash-strapped banks would have followed Bank Century into more serious problems. Boediono has made no comment. State Secretary Hatta Rajata told a parliamentary hearing on Monday that the government's decision to bail out the troubled Bank Century was "for the sake of the national economic interest." Lawmakers, however, have questioned why the central bank viewed the problems at Bank Century as a "systemic threat," and whether the bailout, using funds from the state's Deposit Insurance Corporation, was legally justified. Legislator Dradjad Wibowo, who sits on the parliamentary commission on banking and finance, told reporters: "It is now a question of what and who the bailout was supposed to save."
