Singapore, Indonesia Finally Settle Extradition Treaty

See also:

Sand in Singapore’s Gears, 3 March 2007

Singapore’s Shifting Sands, 30 January 2007

Despite the conclusion of negotiations over an extradition treaty Monday night between Singapore and Indonesia that could potentially deliver some very rich errant bankers back to Indonesia, don’t expect to see anybody going home anytime soon.

At a joint news conference in Singapore Monday night by Singaporean Foreign Minister George Yeo and Hassan Wirajuda, foreign minister of Indonesia, the two said the agreement would be signed in Bali Friday.

"After two days and one night of arduous negotiation, we have reached an important agreement," Yeo told reporters.

After dragging on for 34 years, the treaty became the focus of intense bargaining after Indonesia banned the export of sand to Singapore in December, ostensibly because the island republic was importing so much of what ought to be the world’s cheapest commodity that it was destroying Indonesia’s environment on a couple of nearby islands. That threw Singapore’s construction industry into a tailspin and forced the island republic to release sand from its stockpile to make up for the shortfall.

Sand is a crucial commodity for Singapore, which has been growing for more than 40 years on imported Indonesian soil. In 1960, the entire island state was only 581.5 square kilometers. It has since grown to some 650 sq km and expects to grow by another 100 by 2030 – if it can find the firmament. And, while the pariah state of Burma has offered to be a long-term supplier of sand, granite and other construction materials, it is neighboring Indonesia that is the island’s only viable supplier. Malaysia has long since banned sand exports to Singapore.

The stalled sand barges on their way to Singapore were actually political leverage in the extradition squabble over a flock of crooked bankers said to be hiding out there after fleeing Indonesia following the 1997-1998 Asian financial crisis. Singapore has long styled itself as an Asian equivalent of Switzerland, maintaining strict banking secrecy laws. Government authorities have been refusing to sign the treaty, with officials saying they would only negotiate if the pact was signed in tandem with a security agreement. Singapore has been leery of Indonesian intentions ever since Indonesia’s then-president, Sukarno, staged what he called “konfrontasi” in an unsuccessful attempt to take over the entire island of Borneo between 1962 and 1966. Singapore was part of Malaysia at the time.

Indonesia believes the bankers took part in an astounding heist of more than US$13.5 billion looted from the Indonesian central bank’s recapitalization lifeline to 48 ailing banks. According to Indonesian authorities, the recipient banks, many owned by cronies and relatives of the ousted strongman Suharto, used much of the money for currency speculation, loans to affiliated business groups and repayment of subordinated loans and securities transactions instead of guaranteeing creditors’ deposits.

But more than that, an astounding 18,000 Indonesians considered to be worth more than US$1 million are living in Singapore, population 4.5 million, with an aggregate wealth of US$87 billion, according to a 2006 study, the “Asia-Pacific Wealth Report” by Merrill Lynch and the consulting company Capgemini. Indonesia, with a population of 180 million, has only 17,000 millionaires itself.

The city-state has always been a bolt-hole for Indonesian tycoons, many of them Chinese, a step ahead of the law or sporadic ethnic violence such as that which swept Indonesia after the financial crisis. Yunus Husein, Chairman of the Financial Transactions Report & Analysis Center in Jakarta, told reporters that the Indonesian embassy in Singapore had confirmed that some 200 debtors who owe money to the state had been hiding there since 1998.

Singaporean officials protest that the country’s Prevention of Money Laundering Act of 2002 contains a legal requirement under which financial institutions are legally

required to report suspicious transactions. Critics, however, say the law applies only to transactions linked to serious crimes or terrorism or revenues derived from illegal logging. Fund managers and others in the financial world – most notoriously Morgan Stanley strategist Andy Xie, who was fired for saying so out loud -- say the island republic has increasingly become a global center for hot money from as far away as China and Russia, let alone Indonesia, an embarrassment for a statelet that prides itself on its reputation for incorruptibility, built and guarded by its 83-year-old founder and “minister mentor,” Lee Kuan Yew over more than five decades.

Although Indonesia has long said an extradition treaty was necessary to repatriate the corrupt bankers and politicians and their stolen billions, don’t look for any to be back before the bar of justice any time soon. Many of those who are in Singapore or other parts of the world bribed their way out of the clutches of Indonesia’s notoriously corrupt courts to get to Singapore in the first place.

Among many others believed to be on the lam are Sjamsul Nursalim, former president commissioner of Bank BDNI, who reportedly lives in Singapore. Bank BDNI was the second-largest recipient of funds after Bank Central Asia, a Rp37 trillion gift from the government. Samadikun Hartono, former president director of the now-closed Bank Modern, was found guilty of embezzling Rp169 billion and sentenced to four years in jail; there have been no public reports of his whereabouts.

Bambang Sutrisno and Andrian Kiki Ariawan are also fugitives - they were vice president and president director, respectively, of the closed Bank Surya. Both were accused of embezzling Rp1.5 trillion and sentenced to life imprisonment. Both reportedly live in Singapore.

Sudjiono Timan, former president director of state-owned venture-capital investment company PT Bahana Pembinaan Usaha Indonesia, disappeared when prosecutors tried to arrest him at his home after he was sentenced to 15 years in jail. He was involved in an Rp1.1 trillion corruption case involving the channeling of state funds to Suharto's cronies. He is thought to be in Singapore. Set up in 1993 to facilitate national development and cooperation with foreign investors, Bahana Pembinaan Usaha Indonesia ended up with debts of almost $1 billion and was owed hundreds of millions in outstanding loans by corruption-linked tycoons.

Others include Lidia Mochtar, suspected of embezzling the equivalent of US$S20 million from Bank Tamara; Agus Anwar, a suspect over US$214 million missing from Bank Pelita; and Maria Pauline Lumowa, who headed PT Gramarindo Mega Indonesia and is suspected of masterminding the embezzlement of Rp1.7 trillion from state-owned Bank Negara Indonesia through allegedly fictitious letters of credit. She fled to Singapore before trial.

Several companies have also moved their head offices to Singapore, including Sukanto, boss of the Raja Garuda Mas Group, which had problem loans amounting to US$1.4 billion (Rp13 trillion) owed to several national private banks. Asia Pacific Resources International Holdings Ltd, one of Sukanto’s business units, controls paper and pulp businesses in China, Indonesia, Hong Kong, Brazil and Finland.

Extraditions also usually take extended periods of time. Singapore follows (loosely) commonwealth law, as did Malaysia, where Lorraine Esme Osman, the disgraced former head of the scandal-ridden Bank Bumiputra Malaysia, managed to fight off extradition from the UK for the better part of a decade. In Canada, Lai Changxing, China's most wanted fugitive, has been fighting extradition since 1999. With plenty of money to fight their cases, the fugitives could well stall the extradition process for years.

Hassan and Yeo, in their press conference, declined to give further details until the agreement is signed in Bali in a ceremony attended by Singaporean Prime Minister Lee Hsien Loong and Indonesian President Susilo Bambang Yudhoyono.