Indonesia reformer slams Suharto, praises bank sale


The minister in charge of Indonesian business reforms says the controversial BCA is a sign of things to come

By Alex Frew McMillan
CNN

HONG KONG, China (CNN) -- Indonesia's reform chief, Laksamana Sukardi, has championed the sale of its leading bank as a break from its dictatorial past.

"BCA, Bank Central Asia, is now in the hands of multinationals," Laksamana, the country's minister of state owned enterprises, said Tuesday. "In the past everything was happening according to the whim of one person and his cronies."

Laksamana had harsh words for the Suharto regime, characterized the former leader, whose administration ruled Indonesia with a tight grip from the late 1960s until 1998, as a "mafia don."

"Everything works as long as he is in control," Laksamana said. "But when they fall down, and they do fall down, everything goes with them."

The controversial sale of BCA went through last Thursday. The Indonesian government confirmed that a team led by the U.S. hedge fund Farallon Capital Management had won a 51 percent in Bank Central Asia.

Farallon's partner in buying the bank is the Hartono family, which owns cigarette maker PT Djarum. Their joint venture, FarIndo Investments Ltd., is slated to pay its first installment on March 28. It will complete the deal within six months, according to Jakarta.

Hot topic

The bank controls the majority of banking households in Indonesia, so its final sale is a hot topic. Workers also demonstrated against a sale to an overseas bidder, worried that will increase the chance they will lose their jobs.


The minister spoke at a lunch for fund managers and investors at Hong Kong's Conrad Hotel, as part of a conference

But the final sale will also raise $531 million for the administration of President Megawati Sukarnoputri. And it was a stipulation for a $4.5 billion loan program from the International Monetary Fund to continue.

Laksamana said the BCA sale, which was delayed numerous times, shows that Indonesia is well on the road to reform.

He conceded that the road has been fraught with danger. It is clear that Indonesia faces more challenges than ever, he admitted.

But he claimed that those challenges are coming to the surface because Megawati's government is committed to openness, transparency and reform.

"A bumpy road leading in the right direction is much better than a smooth road that takes you backward," he said.

'Institutions, not individuals'

"We are putting solid institutions in place instead of individuals," he added. "Past efforts did not go far enough. We are paying a high price, economically and politically, for the delay."

The minister, who was giving a lunchtime address to fund managers and analysts at the Conrad Hotel here, supervises the Indonesian Bank Restructuring Agency (IBRA) and oversaw the BCA sale.


Laksamana obliquely referred to the latest scandal, which has seen an Australian reporter leave after Jakarta denied his visa

Indonesia was once a darling of emerging-markets investors. But it suffered heavily during the Asian financial crisis, and the country has yet to recover.

It was forced to nationalize scores of companies, including almost all its banks when the sector veered close to complete collapse.

BCA's former owners, the Salim family, transferred more than 100 companies to the government alone. Rumors have circulated this week in Jakarta that the Salim family is ultimately behind the Djarum backing and the Indonesian investors in the Farallon consortium.

While Laksamana did not address those doubts, he stated that the sale had been fair and open. In the past, problems never surfaced in Indonesia, he said, with business conducted behind closed doors.

"There were very many serious problems during the Suharto years, but they were covered or hidden," Laksamana said.

"The difference now is that we are much more transparent, and so our problems are much more out in the open. But it would be a mistake to read this as a sign of decline."

Press 'making mistakes'

He pinned the blame for past irregularities firmly with Suharto, now in ill health.

"A mafia don does not need the rule of law," he said. "The mafia don will co-opt those he can and crush the rest."

Indonesia appears to be trying to work democratically through its substantial problems, including an almost total lack of overseas investment.

The minister noted that Megawati's predecessor, Abdurrahman Wahid, was removed from power by parliament and without a coup. Past transitions have inevitably been "bloody" in Indonesia, he noted.

But the Megawati administration that Laksamana is a part of has also drawn fire for being too slow on reform, lacking a game plan and for attempts to silence opposition. The Farallon investment is the only major direct investment in the country under Megawati, who took power last year.

Laksamana also briefly hinted at the latest scandal in Jakarta, which has seen a reporter sent home after the government refused to extend his visa.

'Free' press

Lindsay Murdoch, a reporter for Australian newspapers The Age and The Sydney Morning Herald, left Jakarta on March 10.

The newspapers say he was banned for his "authoritative reporting." Jakarta claims Murdoch's visa was not renewed for technical reasons.

Laksamana praised Indonesia's press as "free" and said it has been testing the limits of expression.

"Like a bird stretching its wings, mistakes are made, and there are excesses, in the process," he said. But Indonesia remains committed to public debate and freedom of expression, he said.

In the past, free discussion did not exist at all in the country, he said.

Laksamana also praised the process of decentralization in Indonesia, an island nation that some experts consider virtually impossible to govern centrally.

The minister said he expects Indonesia, the largest majority Muslim country in the world, to develop a state system not unlike the United States.

Laksamana was in Hong Kong as a guest of investment bank Credit Suisse First Boston's Asian investment conference, which started Tuesday and runs through Friday.