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| Banking row could cost billions |
| Dr. Terry Lacey |
| Since Indonesian President Susilo Bambang Yudhoyono (SBY) swore in his new Cabinet in October 2009 he has been assailed by the press over the undermining of the Corruption Eradication Commission (KPK) and who is to blame for the recent US$716 million bailout of Bank Century.
But as a parliamentary inquiry looks to haul in government top-shots to play the blame-game, alongside an investigation by the Supreme Audit Agency (BPK) and under the watchful eye of the Corruption Eradication Commission (KPK), the over-politicization of monetary policy could start costing billions of dollars, while money flows out of the country and investors hold back.
Political rows overshadowed the first 100 days and economic plans of SBY´s new government, despite its big majorities in general and presidential elections. But the electorate had had enough of the old parties and a corrupt parliament.
The President briefly looked all-powerful, with his comprehensively crafted coalition, even including ministers from the defeated Golkar Party.
But suddenly SBY was hit by a well-crafted campaign apparently to split him from part of his anti-corruption political base and from top economic team members like Finance Minister Sri Mulyani Indrawati and Vice President Boediono, previously Governor of Bank Indonesia (BI).
This looked designed to stall the new SBY government before it started, laying blame for mis-management of the Century bailout on SBYs top technocratic elite, while lining up Golkar and SBY`s coalition partners to bargain for concessions.
The political arguments hitting SBYs economic team leaders hinged on whether the collapse of Bank Century constituted a systemic threat to the banking system.
But now three new arguments have come into play. (The Jakarta Post Dec 22, 09).
First as Miranda S Goeltom, former senior BI deputy governor, said to the parliamentary inquiry, in normal circumstances perhaps a bailout of a small bank was not justified, but in the midst of a global banking crisis, perhaps it was, "Even big banks like BRI and BNI told us that they were in difficulty…"
Second Bank Mandiri´s leading economist Mirza Adityaswara warned Indonesia may lose economic "oomph", with investors going elsewhere.
"It may trigger capital outflow if political conditions continue to intensify".
With Sri Mulyani facing the parliamentary inquiry into Bank Century on January 4th economist Sri Adiningsih confirmed political tension could cause capital outflows.
Third, Sigit Pramono, chairman of the Indonesian Banking Association now warns the politicization of the Bank Century case could damage the banking industry.
The Bank Century case includes criminal acts by shareholders, incompetent bank supervision by BI, and possibly corruption, and maybe legal gaps in bailout regulations, which the parliament refused to agree.
But can these crimes and sins of omission for which many are responsible be legitimately blamed only on two iconic reformers who fought valiantly for economic reform and against corruption? There are three reasons in the long-term national interest why this cannot be:
Firstly the World Bank confirms that despite the robust economic performance of the previous SBY government led by his internationally-respected economic team some $10 billion flowed out of Indonesia this year. More may go if the mire deepens.
Second, Indonesian politicians and high officials cannot be intimidated by the attempted criminalization of monetary policy, albeit mostly by political innuendo.
The nation`s leaders must retain the right to act in a banking or financial crisis.
Thirdly Sigit Pranomo says this rolling political row, led by the parliamentary inquiry chaired by Golkar, is beginning to undermine confidence in the banking system.
How far are the campaigners against President Susilo Bambang Yudhoyono, Vice President Boediono and Finance Minister Sri Mulyani Indrawati prepared to go in risking damage to the banks, the economy and national reputation to prove that those who had least access to BI data on how shaky the Indonesian banks were in late 2008 knew best, and those who had best access had the poorest judgment? Sounds like an even argument at best, and that those elected to decide should be decisive.
terrylacey2003@yahoo.co.uk |
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