Indonesian Parliament Endorses Plan To Probe Bank Bailout
By I Made Sentana, Of Dow Jones Newswires
JAKARTA -(Dow Jones)- Indonesia's parliament approved Tuesday an investigation
into the government's IDR6.7 trillion ($706 million) bailout of PT Bank
Century--a move which further strengthens the view that the issue could be being
used for political purposes.
Parliament Speaker Marzuki Ali said a special committee will probe the
decision to save Bank Century and track down the flow of funds out of the bank
after the government injected cash into it.
At the center of the controversy are Vice President Boediono and Finance
Minister Sri Mulyani Indrawati, who jointly took the decision to rescue Bank
Century. Boediono was the governor of Bank Indonesia at the time of the bailout
in November 2008.
Several legislators have questioned the move after the government ended up
injecting ten times the money the central bank had initially estimated would be
needed.
President Susilo Bambang Yudhoyono's political opponents have also alleged the
funds might have ended up helping to finance his election campaign earlier this
year. He has denied the claims, while also supporting the probe into what
happened to the bailout money.
The head of the state audit agency, Hadi Purnomo, who was sacked from his
position as the head of the taxation office in 2006 by Mulyani, said last week
that around IDR4.7 trillion of the bailout funds are unaccounted for, and the
decision to save Bank Century was based on subjective judgment, without updated
data.
Purnomo has alleged that the process also violates Bank Indonesia's
regulations.
Mulyani and Bank Indonesia have repeatedly defended the bailout, saying it was
aimed at preventing the much more significant damage to the country's banking
system which would have occurred if Bank Century had collapsed at the height of
the global financial crisis.
They've also said that 23 other banks were suffering liquidity problems and
not bailing out Bank Century at the time would have led to systemic risk.
Analysts said the issue is increasingly taken on a political dimension,
although it's unclear whether parliament's investigation will have a major
impact on the government, especially on Boediono and Mulyani, the country's two
central economic policymakers who are well respected by the financial community.
"This should be closely monitored, as we do not know how far the case could
implicate the current Vice President and Finance Minister," said Bank Danamon's
economist Helmi Arman.
Meanwhile, Citigroup economist Johanna Chua said last week the case could also
delay economic initiatives and reforms as key policymakers may be distracted.
-By I Made Sentana; Dow Jones Newswires; 62-21 39831277; I-Made.Sentana@
dowjones.com
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