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Practical politics all along

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Jakarta Post Editorial - December 27, 2011

After the completion of a six-month forensic audit process, the Supreme Audit Agency (BPK) last week announced that its auditors found no evidence of corruption involving the key officials responsible for the US$700 million bailout of Bank Century at the height of the global financial crisis in November 2008.

The BPK's forensic audit – its second special audit of the Bank Century bailout, following the agency's similar effort in 2009 – was ordered by the House of Representatives in June after lawmakers completed their own special inquiry of the bank bailout in March 2010.

Politics have been evident in all these investigations of the Bank Century bailout: from the inception of the House's inquiry in December 2009 to the announcement of its findings and recommendations in March 2010 to the House's order for the BPK to complete a second special audit of the bailout.

As is true in most incidents of "practical" politics, the facts have been ignored. Even though the House inquiry found no evidence of corruption when it announced the results of its inquiry, lawmakers persevered and ordered a criminal investigation of then finance minister Sri Mulyani Indrawati and then Bank Indonesia governor Boediono.

Investigators at the Corruption Eradication Commission (KPK), however, could find no evidence to support filing criminal cases against either Sri Mulyani, who resigned as finance minister and left the Cabinet in May 2010 to become a managing director of the World Bank, or Boediono, who was elected Vice President in July 2009.

Throughout the investigations, Sri Mulyani and Boediono, both internationally-respected technocrats of impeccable integrity, said that the bailout of Bank Century was necessary to avert a financial crisis and to prevent panic among depositors in Indonesia.

The main thrust of their argument, which has been fully accepted by financial markets, was that bank runs were contagious and might spread throughout the nation's banking system as happened in 1997 and 1998.

Indonesia escaped the 2008 global crisis unscathed – even though this could be attributed in part to a large domestic market that made the nation less dependent on exports and the fairly low exposure of investors in Indonesia to interntional structured financial products.

But we could have done much worse during the last quarter of 2008 when the stock market crashed, the currency plunged and the banking system was under severe pressure amid massive capital flight by jittery investors.

As in most crises, there is an inherent risk of honest mistakes during a bank bailout, given time pressures and rapidly worsening problems – even if all requirements have been fulfilled.

But if politicians dispute or attack actions taken in a good faith and in full compliance with proper procedure as stipulated by law, no senior official will have the courage in the future to take any economic or financial decisions – however urgent or imperative they may be.

Now that the forensic audit has been completed, it is time for the politicians at the House to move on to other more important matters of the public interest. Let's stop harrassing the KPK for what lawmakers have called an utter lack of courage to investigate and prosecute senior officials.

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