NYT: Indonesia Releases Bank Audit, Hastening I.M.F. Help (fwd)

[Robert Weissman <rob@essential.org>]

The New York Times
November 3, 1999
Indonesia Releases Bank Audit, Hastening I.M.F. Help
By WAYNE ARNOLD
SINGAPORE -- Indonesia's Parliament published a long-awaited report Tuesday
on a banking scandal that had helped bring down the administration of
former
President B.J. Habibie, and the International Monetary Fund said the move
cleared the way for it to resume a $43 billion economic rescue package by
the
middle of December.
Bowing to pressure from the IMF, the World Bank and the newly elected
Indonesian president, Abdurrahman Wahid, Parliament Speaker Akbar Tanjung
agreed not to wait for two committees to deliberate on the report, a
process
that had been expected to take more than a month. The senior economics
minister, Kwik Kian Gie, handed the report to the IMF's Asia-Pacific
director, Hubert Neiss, at a news conference in Jakarta on Tuesday.
Its release was likely to help allay foreign investor concerns about
Indonesia's commitment to economic change. More immediately, it lessened
the
chances that the Indonesian government would run out of money, something
Kwik
and other officials had warned was imminent.
Analysts and the IMF cautioned, however, that the release of the audit was
only the beginning of a long process of ensuring that the corruption
underlying the scandal was eliminated.
"It's not at all over," said Anoop Singh, the monetary fund's deputy
director
for the Asia-Pacific region. Subject to approval from IMF headquarters, he
said, a team would visit Jakarta next week to begin drafting a new letter
of
intent for the next aid disbursement.
The banking audit, conducted in August by PricewaterhouseCoopers, examined
the movement of 546 billion rupiah, or about $80 million, that had been
transferred out of Bank Bali, a major commercial bank nationalized in June.
The money went to a company controlled by Indonesia's former ruling party
and
later made its way into dozens of bank accounts in the country and abroad,
some of them belonging to the party and to former legislators.
PricewaterhouseCoopers recommended further investigation of a number of
officials, including the central bank governor, Sjahril Sabirin; the former
finance minister, Bambang Subianto; and the former state enterprises
minister, Tanri Abeng.
Critics say the money had been intended to help finance Habibie's election
campaign. The funds had originally been paid to Bank Bali by the Indonesian
Bank Restructuring Agency, the government agency set up to help rebuild the
nation's banking industry under terms of the IMF-led rescue package. The
misappropriation of the money undermined the core of Indonesia's efforts to
resuscitate its economy.
"You've seen paralysis of economic policy-making while the Bank Bali affair
grew," Singh said.
The IMF and the World Bank suspended talks on releasing roughly $2 billion
in
loans in September, hoping to exert pressure on Jakarta to stop militias
from
rampaging in East Timor after a referendum vote there in favor of
independence. But the pressure shifted back to the Bank Bali scandal after
Indonesian officials released only an abridged version of Pricewaterhouse's
report, arguing that publication of the full report would violate
Indonesia's
bank secrecy laws. Amid accusations of a cover-up, the international
lending
agencies demanded the release of the full report and prosecution of those
responsible for wrongdoing.
The Bank Bali scandal also illustrated the difficult choices faced by
international lenders to Indonesia. Having already handed over $10 billion
of
the promised aid, the IMF and the World Bank could ill afford to let the
country's economy fail. Withholding aid, moreover, made foreign investors
in
Indonesia even more nervous and increased Indonesia's need to raise funds
--
meaning that the country might eventually need even more money from the IMF
and the World Bank.