Greg Earl, Jakarta – Indonesia is facing a major credibility challenge to its economic assistance package with President Soeharto's son yesterday launching a legal challenge to the closure of his bank.
The challenge dampened financial market sentiment towards the package again yesterday with the stockmarket maintaining its flat response and the rupiah losing some of the gains it made with the backing of the central banks of Singapore and Japan.
Bambang Trihatmodjo's court action followed a claim that the bank closures had been politically motivated to discredit the First Family and Mr Soeharto's election prospects.
"I think there's a political move to disgrace my family," he said, claiming that Mr Soeharto had not been fully aware of all the detail of the reform initiatives.
The developments have raised concerns that political lobbying may undo parts of the package and that Indonesia may be facing another destabilising intra-Soeharto family fight over business territory.
One foreign banker said yesterday: "This is going to be the real test case. If they don't implement these aspects (banks closures) the place will just collapse completely."
Three banks part-owned by Soeharto family members were amongst the 16 closed last Saturday in what has been widely interpreted as a major indicator that the Indonesian Government is serious about introducing the reforms which it outlined in response to the $40 billion plus assistance package.
But, in an extraordinary development, Mr Bambang has confirmed rumours that three other banks owned by family members were slated for closure but not included on the list which included Mr Bambang's Bank Andromeda.
He said the family members were his sister Siti Hardiyanti Rukmana, his brother Hutomo Mandala Putra and uncle Mr Sudwikatmono, indicating the saved banks were banks Yama, Utama and Subenta.
In another challenge to the banking authorities, Mr Soeharto's half-brother Mr Probosutedjo has kept his liquidated Bank Jakarta open and has been reimbursing some depositors from his own personal funds.
Mr Bambang says his Bank Andromeda was not given enough notice before the liquidation was announced. He says he was planning to inject new capital which would have saved it. In the lawsuit, Bank Andromeda demands that the liquidation ruling be rescinded and that the Government make moves to restore the "good name" of the bank's shareholders.
Andromeda was the fourth-largest of the 16 banks with assets of about $450 million. It has admitted that it broke the legal lending limits by lending about $75 million to the controversial Chandra Asri chemical plant which is owned by Mr Bambang. Mr Bambang says the lending limit violation was not serious because 90 per cent of banks in Indonesia also breach the rule.
Legal experts say that Mr Bambang is within his rights to challenge the decision but economic analysts say a court case would be seen as a test of the Government's resolve.