Jakarta – A loan scandal involving Indonesia's biggest textile magnate, Marimutu Sinivasan of the Texmaco Group, is turning into a major challenge for President Abdurrahman Wahid's four-month-old government.
Mr Abdurrahman, who came to power pledging to end corruption in the world's fourth most populous country, is faced with having to explain why three months after the scandal – involving improper loans to the group – was exposed, it has yet to be resolved.
The case is drawing the attention of the International Monetary Fund, and may threaten the more than US$6 billion a year in international aid that Indonesia is depending on to help fill its deficit. In August last year, the IMF suspended aid for six months when a US$80 million scandal involving PT Bank Bali was exposed.
"It really boils down to how much the IMF can stomach the old ways being retained," said Song Seng Wun, an economist at GK Goh Research Pte Ltd. "Ultimately, the government is dependent on external aid." At the centre of the Texmaco case are loans it got from state-owned PT Bank Negara Indonesia, or BNI, between the end of 1997 and early 1998 with approval from then president Suharto.
The loans broke banking regulations that limit credits to a single customer. Texmaco's Mr Marimutu, a close associate of Suharto, denies any wrongdoing.
In an added twist, the Indonesian Bank Restructuring Agency (Ibra) said this week that BNI has not transferred the loans to the agency as required under an agreement between the government and the IMF.
Indonesia agreed that all bad loans from state banks would be transferred to Ibra, allowing the agency to recover the money or seize assets of the defaulting company.
BNI's refusal to transfer the loans and the sluggishness with which the government is handling the case is raising concern that Texmaco is getting special treatment from the government.
The IMF publicly is taking a neutral stand. "From the beginning we haven't tried to single out special treatment for any case," said John Dodsworth, the IMF's representative for Indonesia. The transfer of Texmaco's loans to Ibra "is likely to happen very shortly", he said.
Granted, the government has taken some steps against Texmaco. Days before the IMF released US$349 million to Indonesia in February, the country closed a Texmaco bank, PT Bank Putera Multikarsa.
The government took over the bank and closed it after it was found to have 80 percent non-performing loans and a capital adequacy ratio – the ratio between a bank's capital and its risk weighted assets – of negative 48 percent.
Still, "with things popping up left, right and centre it is difficult for the IMF to close an eye", said the GK Goh economist. The new administration could be moving slowly because of the implications on the economy of the collapse of a large group like Texmaco, analysts said. Texmaco, which employs more than 100,000 people, has the world's third largest polyester maker PT Polysindo as well as machinery manufacturing units and garment and textile factories. The firm turned to the state for help after the government in August 1997 floated the rupiah, sending it diving.