Indonesia Bailout Farce Appears Over
|Mar 4, 2010|
In a late night session that ended with lawmakers singing, dancing and patting themselves on the back to celebrate, a majority of the Indonesian House of Representatives on Wednesday concluded a lengthy probe into the 2008 bailout of Bank Century by saying the action was illegal and recommending that law enforcement agencies go after supposed corruption and banking crimes.
The result, a disappointment for President Susilo Bambang Yudhoyono that could signal the effective end of his ruling coalition, nonetheless did not directly name Vice President Boediono and Finance Minister Sri Mulyani Indrawati, two of his most respected aides and the real targets of the politically inspired probe, or call for their ouster. The pair seem to have survived the ordeal with their positions safe.
Although there are expected to be additional actions taken to investigate the matter on the basis of a resolution that violations and irregularities had occurred in the bailout, it appears likely that the controversy can now trickle away. The 325-212 vote was not viewed as a major defeat for the president. While Boediono and Sri Mulyani were listed in an addendum to the resolution, the recommendation that police investigate further isn't binding and the administration is likely to ignore it or deflect it.
The downside is that three of the administration's ruling coalition partners, including powerful Golkar and the Islamist Prosperous Justice Party (PKS), bolted from the president's Democratic Party to call the bailout illegal. Despite fierce lobbying to call the bailout proper, the Democrats convinced only one of the other eight House parties to back its view that nothing illegal had occurred in the bailout itself.
The crucial factor, though, may not be what happened in the House, but that Yudhoyono, after months of wavering and contradictory signals, earlier this week publicly committed himself to supporting Boediono and Sri Mulyani over the affair, which began in October 2008 when Bank Century capsized in a sea of fraud-created debt and several of its top officers ran for cover, some leaving the country with hundreds of millions of dollars in bank funds and others now sitting in prison. At the time, Boediono was central bank governor. Sri Mulyani chaired the committee that approved the bailout. The two officials have said they allowed the $700 million bailout amid fears that a collapse of Bank Century threatened the banking sector at the height of the global financial crisis. They say the crimes that occurred had nothing to do with the bailout.
The inquiry into the affair has paralyzed Indonesian politics for months and tarnished Yudhoyono's reputation both as a decisive leader and as a reformer. He has proven unable to keep his fractious ruling coalition in line, despite attempts by some lawmakers during the probe to say that even he took bailout money for his political party. That claim the committee quickly backed away from since they had no evidence.
His appearance of waffling at times on the fate of the two officials, along with his late and indecisive support in December for the embattled Corruption Eradication Commission when two top officials of that organization were arrested by corrupt police, has also hurt him both within and outside the country.
The fact that both Boediono and Sri Mulyani will likely remain in government should be a welcome signal to international investors.
The House grandstanding on Wednesday bordered on farce at times and ended two days of plenary antics over the final conclusion of the probe. During the lengthy televised investigation, which carried no legal weight, it was clear that Golkar wanted Sri Mulyani's scalp at the very least. Much of the rest of the hearings seemed an attempt by individual lawmakers to raise their political profiles in front of the cameras.
Government official say privately they believe the entire affair was manipulated by Golkar Chairman and tycoon Aburizal Bakrie to punish Sri Mulyani for going after his companies over tax arrears and a number of regulatory violations. Said one observer in Jakarta, the final vote means that Sri Mulyani faced down Bakrie and won this round.
"The vote was a joke in the first place," said a long-time Jakarta-based political observer. "It's not legally binding and it shows the entire process was political."
A spokesman for the vice president told reporters, "The House political conclusion is not a legal conclusion. It is only an investigation in front of the TV, which so far has not provided proof. The truth of the House version is only the political truth, not the legal [truth]."
Outside the House, two days of small but unruly demonstrations accompanied the vote. Police fired tear gas and water cannons in attempts to disband the protesters after they began throwing rocks and other projectiles. Thirteen people were reported injured. But as an added indication of the level of political theatre, protesters have readily acknowledged to reporters that they were paid about $3 a head and given free meals to attend the rallies.
The next step will be to see if Yudhoyono makes good on Democratic Party calls to boot the disloyal coalition members out of his cabinet. So far he has taken no action. Most observers believe he could have stopped the investigation in its tracks before it was launched, at a time when he was at the height of his political power as a result of his strong victory in the July national presidential election.
If the affair is over and the two remain in place – there is a slight chance lawmakers could seek an impeachment resolution against Boediono ‑ reformers are waiting to see if Yudhoyono will defang the errant coalition members. The betting is that he won't. Bakrie may simply be too powerful and too rich for Yudhoyono to battle head on.
The contest between Bakrie and Sri Mulyani seems certain to continue as the public side of the affair simmers down. Neither side appears likely to seek an accommodation with the other. If the government wants revenge against Bakrie, one official said, one avenue open is to step up regulatory pressure on his companies, which are heavily dependent on government contracts and also complex financial maneuvers that are subject to official oversight by Sri Mulyani's ministry.
The trench warfare may be on the way.