Louise Williams, Jakarta – President Soeharto's son Mr Bambang Trihatmodjo is back in the banking business only weeks after his under-capitalised bank was liquidated under International Monetary Fund (IMF) reforms - a move likely to further undermine confidence in Indonesia's ailing economy.
The local Kontan newspaper reported yesterday that Bambang was taking over the tiny Bank Alfa, owned by his father's close friend and Indonesia's richest man, Mr Liem Sioe Liong. Meanwhile, the Jakarta stock market continued its slide yesterday morning to the lowest point in almost five years and the rupiah lost further ground this week as the Soeharto Government revealed the extent of the nation's foreign debt.
At the same time, Bambang's battle against the closure of the Andromeda Bank, in which he held a 25 per cent share, and his success in obtaining a new bank is likely to raise doubts about the IMF's ability to tackle nepotism as part of the $US38 billion ($55.1 billion) rescue package for Indonesia.
"With Bank Alfa, Bank Andromeda's assets can be shifted, we will use Andromeda's offices," Bambang said. "In short, Andromeda is only changing its name."
Tens of thousands of small depositors, businesses, superannuation funds and associations have lost all but the first 20 million rupiah ($8,300) in their accounts following the liquidation of 16 banks under the first round of reforms of the IMF's bail-out package.
Bambang angered many Indonesians when he challenged Andromeda's liquidation, saying all the bank had done was break the law by exceeding the legal lending limit. He admitted that funds from Andromeda were used to prop up his petrochemical business.
The stock market reacted negatively to Bambang's outburst, seen as a sign that the politically connected elite was not prepared to suffer the pain of the economic crisis now hitting millions of ordinary Indonesians.
The stock market opened low and depressed yesterday morning and brokers predicted further downward pressure following the revelation this week that Indonesia's external debt had risen 7 per cent in six months to reach $US117 billion. Private debt now stands at $US65 billion, half of which will mature within the next 12 months, raising the real prospect of massive lay-offs and corporate bankruptcies.
Indonesia's Finance Minister, Mr Mar'ie Muhammad, told Parliament the Government would not use the IMF funds to bail out or roll over private debts, meaning Indonesia's biggest businesses will have to buy large amounts of US dollars for short-term debt servicing, putting further downward pressure on the rupiah.
He said every 100 points the rupiah fell against the US dollar would increase Indonesia's public debt by $US145 million.