Business, Finance & Economics

Politics, economics, and "transvestites" in Indonesia. A little violence, too.


JAKARTA, Indonesia — Indonesian lawmakers voted today to recommend law enforcement agencies investigate the bailout of Bank Century, but stopped short of naming any specific officials in their censure.

The vote came a day after several members of parliament, fed up with months of political wrangling, brawled over the house chairman’s decision to delay the vote another day. Tensions boiled over again today when some lawmakers booed their colleagues and called them “banci,” a derogatory Indonesian word for transvestite, for choosing to abstain from the vote.

Meanwhile, outside the parliament building, anti-government protests turned violent for a second day. Thousands of police were overrun by demonstrators who tried to crash through barricades and enter the parliament building. Protesters through bricks at police and burned effigies of the public officials involved in the bank bailout. Later in the afternoon, police responded with tear gas and water cannons. At least five demonstrators were injured and several were arrested.

The special parliamentary committee charged with investigating the bailout failed to reach a consensus on Tuesday, offering instead two opposing recommendations for the wider parliament to vote over today.

At issue was the government decision to rescue troubled Bank Century and its subsequent management of bailout funds, which ballooned to more than $700 million, or four times the originally requested amount.

The committee’s first recommendation said the bailout was justified, while the second said there were irregularities and a formal investigation should proceed.

Foreign and domestic investors have followed the inquiry, fearing two of the country’s most-respected reformers, Finance Minister Sri Mulyani and Vice President Boediono, formerly governor of Bank Indonesia, who initially made the decision to rescue troubled Bank Century, would be forced to resign or change posts.

Although parliament voted for an investigation, the decision not to censure the pair directly represented a major political concession and indicated their jobs were safe for the time being, allowing investors to breathe easier. President Susilo Bambang Yudhoyono also made a rare public statement of support for Mulyani and Boediono on Monday, further bolstering their positions.

Furthermore, Indonesia’s parliament does not have the authority to force an investigation and the national police are likely to proceed without approval from the president.

Kevin O’Rourke, a Jakarta-based political analyst, said the contentious inquiry into the Bank Century bailout has partly derailed President Susilo Bambang Yudhoyono’s second term agenda, which began in October.

“It has posed a distraction from other matters,” he said. “But it is constructive in a sense because I think this represents the culmination of years of tension between reformers and elements of the establishment who have been resisting reforms.”

Founded by the Tantular family in 1989, Bank Century flourished during the Suharto regime and survived the 1997 Asian financial crisis. It fared less well during the most recent crisis and, coupled with the imprisonment of its most recent director, Robert Tantular, for embezzlement, was near collapse when it approached the central bank in 2008 for bailout funds.

The bank is now fully owned by the government and has been renamed Bank Mutiara.

Both Indrawati and Boediono staunchly defended their decision, saying it was necessary to prevent panic among depositors of other banks and protect the country at a time of financial instability.

The committee investigating the bailout repeatedly failed to find evidence of wrongdoing among government officials or to connect Mulyani, Boediono or the president to any irregularities.

“I think the entire banking community feels, since there was considerable nervousness about banks globally at that time, that they acted appropriately,” said Eugene Galbraith, chairman of Bank Central Asia.

Although any further investigation is unlikely to affect investment as long as Mulyani and Boediono keep their jobs, the country’s political climate is cause for concern, analysts say.

The controversy has highlighted the continuing struggle between the country’s reformists and its old-guard political and business establishment, many of whom came to prominence during the reign of Suharto, Indonesia’s longtime authoritarian ruler.

It came as no surprise that opposition parties voted to censure the bailout. But they were also joined by Golkar, Suharto’s old political vehicle and nominally a member of Yudhoyono’s coalition. Golkar is chaired by the billionaire businessman Aburizal Bakrie, whose vast business interests are often targeted by reform efforts.

Bakrie held several ministerial posts during Yudhoyono’s first term, including coordinating minister of the economy and minister of people’s welfare, and helped finance the president’s first campaign.

Political analysts said the growing rift between the two men, which grew substantially during the Bank Century investigation, could ultimately benefit the country’s reform movement.

“Previously Yudhoyono tried to maintain harmony with Golkar and Bakrie,” O’Rourke said. “Now there is a clear rift between the two. I think it could have a positive implication for reformist policy-making on behalf of the government.”

Mulyani, arguable the country’s most stalwart financial reformer, most recently ordered an investigation into tax evasion by Kaltim Prima Coal, whose parent company is part-owned by the Bakrie Group. The government banned an official at the company from international travel until the investigation is complete.

Bakrie and Mulyani were also at odds in 2008, at the height of the financial crisis, when a heavily indebted Bakrie-related company defaulted on a loan, sparking a massive sell-off of Bakrie Group stock. Mulyani refused to approve a bailout of Bakrie’s company and opposed the suspension of trading at the time on the Jakarta Stock Exchange.

Bakrie Group companies lost more than 40 percent of their value during the sell-off before the index’s chairman finally approved a suspension.

Indonesia emerged from the global financial crisis almost unscathed and has continued to post positive growth rates since the financial crisis struck in 2008, partly due to Mulyani’s leadership. The country is now increasingly included alongside other fast-growing emerging markets like Brazil, Russia, India and China — which together make up the powerful BRIC group of emerging markets.