The impact of the financial crisis which devastated the economy is still being felt by taxpayers. Seven years after the crash of 1997 – Indonesians are now set to face a multi-billion dollar bill. In two weeks time the government agency charged with recovering the fortune spent on propping up the country's banks during the crisis, will close its doors. But its recovered less than 30 per cent of the total and yet says its done a good job.

Presenter/Interviewer: Karon Snowdon

Speakers: Professor Hal Hill, Australian National University

Snowdon: 600-trillion rupiah is a lot of money. In current dollar terms, that's about 70-billion US or 90-billion Australian dollars. That's how much public money was poured into the 90 per cent of Indonesia's banks which faced collapse during the financial crisis of the late 1990's. The government had no choice but to prop them up, but the idea was to retrieve the money by taking over the bank assets and selling them to investors.

Trouble was many of the assets didn't even exist or were not worth as much as claimed by the bank owners – many of them crooks who happily took the government's money. IBRA – the Indonesian Bank Restructuring Agency had the job of taking over some of the banks, restructuring the assets and getting the money back. It managed to retrieve only 30 per cent, leaving taxpayers ultimately to meet the bill of the remaining 400-trillion rupiah.

Convenor of the Indonesia Project at the Australian National University, Professor Hal Hill, says its no wonder IBRA's job is incomplete, given the level of political interference and because it had seven bosses in six years.

Hill: For the debt work-out process to operate effectively, it really had to be much more depoliticised. That is there had to be genuine professional negotiations, creditors and debtors had to work together, both sides had to take haircuts, and when a decision was reached that should have been it. None of those requirements operated in the case of IBRA. So the result is as you would expect.

Snowdon: And too much political baggage from the past?

Hill: Yes too much political baggage from the past, but also into the future. And the additional complication in the work-out process are the elections being held this year and the necessity to fund them. All the political parties through the parliament and through other means have had their hand in the process trying to delay it because they want to fund their operation.

Snowdon: IBRA has been accused in some cases of selling back assets to the original owners at discount prices and some parliamentarians are calling for an independent audit of its operations. The powerful Audit Agency has confirmed it plans to undertake that audit. IBRA's Chairman, Syafruddin Temenggung told a press conference this week the massive loss of state funds is the cost of the crisis. He criticised the government's interventions and the poor quality of many of the assets IBRA took over. He also reportedly criticised the government for its failure to prosecute those bank owners who's actions were illegal and who never returned the money they stole. Hal Hill says the private bad debts of the old days have been transferred to burden the public and Indonesia's future.

Hill: Indonesia's gone from having almost no public debt under Suharto to a very large public debt which eventually is going to have to be paid for by taxpayers. Now, it was always going to be difficult, the problem is only partly one of political will, there's also things like bankruptcy procedures and so on which have to be worked out. And yes the legacy is unfortunatley it means Indonesians are going to have to pay higher taxes in the future and they're going to have less public goods, like education, hospitals and roads which are desperately needed in the country.

Snowdon: So Indonesia is paying for this for many years to come?

Hill: Yes that's exactly what's happened. Because its been transferred into public debt, into the bonds, which at some stage are going to have to be paid for, then the cost of inaction and very poor recovery rates is higher taxes or lower public goods in the future.

Snowdon: And is there a risk of an overhang of some of these non-performing loans as well still in the system?

Hill: Oh yes, it means actually that potential foreign investors, because of the uncertainty are going to continue to have a really high risk premium for any business in Indonesia. We're almost seven years after the onset of the Asian crisis, domestic investment's also low, I mean its just unfortunate you've got this risky uncertain business environment and this is another part of it.