Indonesian Minister defends bailout
By TOM WRIGHT
JAKARTA — Indonesian Finance Minister Sri Mulyani Indrawati said a parliamentary probe into the government’s handling of a 0 million bank bailout last year is an attempt by rival politicians to unseat her because of her efforts to overhaul the country’s bureaucracy.
Ms. Sri Mulyani and Vice President Boediono have become subjects in recent weeks of a parliamentary investigation into the bailout in November 2008 of Bank Century, a small Indonesian lender. As finance minister, Ms. Sri Mulyani oversaw the bailout; Mr. Boediono was central-bank governor at the time.
Ms. Sri Mulyani said in an interview that failing to guarantee Bank Century’s deposits at a time of huge capital outflows from emerging markets could have sparked panic among depositors of other banks. “I felt like what I did was the right thing for the country,” she said.
Mr. Boediono has also defended the bailout as necessary to stop wider panic in the banking sector.
The head of the investigation, Idrus Marham, who is secretary-general of the Golkar Party, said on Wednesday the investigation was backed by all major political parties and wasn’t targeted at Ms. Sri Mulyani.
“We didn’t do this to target Sri Mulyani. The focus is to get data and facts” on the bailout, Mr. Marham said.
He declined to comment on the specifics of the investigation, which began this month and he said will take two months to complete.
Mr. Marham and other Golkar Party lawmakers who are leading the probe claim the bailout of Bank Century was done without legal authority and without proving a capital injection was needed to stave off a run on other banks. Some politicians have said the bank wasn’t eligible for a rescue because its problems stemmed from fraud that led to the bank’s near-collapse. One of the bank’s former owners, Robert Tantular, was sentenced in September to four years in prison for fraud.
Ms. Sri Mulyani said the bailout was legal.
A former university economics professor and International Monetary Fund senior executive, Ms. Sri Mulyani is respected by many foreign investors for her role in managing Indonesia’s economy, which has included efforts to weed out endemic corruption.
She said she believed the probe was an attempt to discredit her by politicians that oppose her reform agenda, notably leaders of the Golkar Party, including Chairman Aburizal Bakrie, a billionaire businessman and former cabinet member in President Susilo Bambang Yudhoyono’s first-term administration.
Ms. Sri Mulyani said tensions between her and Mr. Bakrie date to last year when she opposed the closure of Indonesia’s stock exchange amid a run on companies controlled by Mr. Bakrie. Mr. Bakrie, one of whose coal-mining firms accounted for a third of daily turnover on the bourse at the time, ordered the closure, she said.
Mr. Bakrie, through a spokesman, declined to comment on the closure.
The finance ministry also last year imposed a travel ban on a number of coal-mining executives, including some from Mr. Bakrie’s companies, after a dispute over the refusal of the companies to pay royalties on the sale of coal to the government.
“Abuizal Bakrie is not happy with me,” she said. “I’m not expecting anyone in Golkar will be fair or kind to me” during the probe.
Mr. Bakrie denied there was any problem between himself and Ms. Sri Mulyani.
Many analysts say the claim that the bailout was illegal appears to be without merit.
“Under the circumstances, what Sri Mulyani and Boediono did was to prevent a crisis,” said Umar Juoro, chairman of the Center for Information and Development Studies, a Jakarta-based think tank.
Other government officials involved in the bailout have supported Ms. Sri Mulyani. The head of Indonesia’s Deposit Guarantee Agency told an Indonesian magazine, Gatra, last week that the rescue was lawful.
Some senior Golkar politicians have in recent weeks publicly called for Ms. Sri Mulyani and Mr. Boediono to hand their jobs to deputies while the investigation is under way.
President Yudhoyono won re-election to a second term this year on a graft-busting platform. Indonesia’s natural-resources-powered economy is forecast by private economists to grow by more than 4% this year, a healthy clip compared with many developed economies, but economists question whether that growth will be sustained if the country can’t get a handle on corruption — a major deterrent to foreign investment here, which lags behind India and China.
Popular dissatisfaction with corruption continues to mount. On Wednesday, students armed with rocks and wooden planks clashed with riot police as more than two dozen rallies involving thousands of protesters broke out as part of annual events designed to mark International Anticorruption Day.
Any signs of an intensification of efforts to oust Ms. Sri Mulyani would also likely spook foreign investors who have applauded her antigraft drive and management of the budget. Since taking up her job at the finance ministry in 2005, she has overseen a reduction in public debt to 30% of GDP from 60%, making it easier for Indonesia to sell debt to foreign institutional investors, bankers say.
“There’s no way you could fill the credibility gap that would be created by her departure,” says David Fernandez, a managing director of J.P. Morgan in Singapore who heads the bank’s emerging-Asia research.
Indonesia is serious about pushing through overhauls to clear up what Mr. Yudhoyono has referred to as a “judicial mafia” of corrupt officials in the courts, attorney general’s office and police, Ms. Sri Mulyani said. But she acknowledged that Mr. Yudhoyono’s first term was a “honeymoon” for her.
“I should become more realistic. I’m expecting a nasty battle if I’m going to do the reform,” she said.
Priorities, Ms. Sri Mulyani said, include continuing to clean up her own ministry, where there is still corruption, and catching more tax cheats. Past efforts led by Ms. Sri Mulyani have included a war on graft in the tax office, greatly increasing the nation’s tax base, and customs department.
Write to Tom Wright at email@example.com