35: Bringing Them To The Table Part 2
Bringing Them To The Table Part 2
18th September 1998:
President Try Sutrisno held a short cabinet meeting this Friday evening. There was only one item on the agenda and some instructions were given to the ministers.
At 8 PM, the President made his appearance at the Credentials Room of the Presidential Palace. It was from this room that he had had his oath first taken on the day of Soeharto’s death, where he had announced the Cabinet, and where he had announced the economic stimulus. Members of the press corps, cameramen, and photographers alike all focused on him.
“Assalamualaikum Warahmatullahi Wabarakatuh.
Fellow Indonesians,
The banking sector is an important sector in the functioning of our economy. Banks are the home the savings we have earned through hard work and from where we can readily access these funds when we need them. Banks also provide loans, which is what helps finance the commercial activities of various businesses of all sizes be they giant manufacturing conglomerates, medium sized family firms, and even smallscale home industries…
Last year the importance of the banking sector was such that the government initiated a program called Bank Indonesia Liquidity Assistance (BLBI). The BLBI assists banks in staying liquid so that it can fulfill its functions to the economy. So far, some Rp. 115 trillion rupiah has been injected to 48 banks in Indonesia.
Yesterday, I received a report from the BPKP regarding the results of external audits of both state and private banks which the government had commissioned four months ago. There are two things we can take away from this report:
*The first is that Indonesian banks regularly breach banking laws regarding legal lending limits especially with regard to lending to affiliates…
*Second and more importantly, is the indication that most of the funds which has been disbursed by the Bank Indonesia has been misused for purposes other than to keep the 48 banks which has requested such funds to keep themselves liquid. Calculations as to how much of these funds have been misused is still being finalized but the audit indicates that these funds have been used for such purposes as giving credit to affiliated companies, paying debt to third parties, currency speculation, overseas investment, and operational costs.
These funds have been disbursed out of acknowledgement that the banking sector is of vital importance to the economy…that an overwhelming majority of these funds have been misused constitute a gross breach of trust…
In light of these revelations and the fact that thus far only four banks are negotiating BLBI repayment agreements, I have taken the following steps:
-As has been announced by the State Secretary, beginning at the end of banking business hours today, banks in Indonesia will observe a Bank Holiday of a week. This means that there will be no transactions and no transfer of funds within banks or between banks and from inside or outside the country. I have taken this step to protect the economy and the savings of the Indonesian people from any rash steps by irresponsible elements.
-I also would like to announce that effective immediately, the government will cease the disbursement of all BLBI funds. It would not be in the best interest of Indonesia’s economic recovery and the Indonesian people as a whole if after seeing indication that the BLBI funds has been misused, this government chooses to do nothing…
I hope that the facts has been made clear to the Indonesian people whose interests I dearly wish to protect and those in the banking sector whose self introspection is much desired.
Assalamualaikum Warahmatullahi Wabarakatuh.”
Try left abruptly, leaving the press corps unsatisfied.
Not content, the press corps went around looking for more information. At the State Secretariat Building, Minister of Economics and National Development Planning Soedradjad Djiwandono, Minister of Finance Mar’ie Muhammad held a joint press conference.
“No assets has been seized or no banks have been nationalized”, said Soedradjad “There is only a bank holiday in which no transactions may be permitted.”
“What signal do you think the President is giving to the BLBI recipients?” asked a reporter.
“It is what it is”, said Mar’ie Muhammad “I think the President is signaling to people in the banking sector to think deeply about their actions. It’s their move now.”
The surprise for the press corps was the sight of Commander of ABRI Wiranto, Army Chief of Staff Agum Gumelar, Navy Chief of Staff Soeratmin, Air Force Chief of Staff Djatmiko, and Chief of Police Luthfi Dahlan dressed in fatigues.
“ABRI resolutely supports the measures announced by the President”, said Wiranto “It will station units from all four branches to help secure the nation’s financial institutions during the Bank Holiday”.
19th September 1998:
For those conglomerates who had received BLBI funds, it was a sleepless night. There were frantic phonecalls to officials to whom they are acquainted as well to each other.
Sofjan Wanandi, Chairman of Gemala Group and Owner of Bank Danahutama saw Liem Sioe Liong in person. Before Soeharto had died, Sofjan Wanandi had begun advocating for Try’s re-election as Vice President and had welcomed Try’s rise to power. Yet he never realized that Try would take this step.
“We’ve got to come to the table, we’ve got to come to the table and negotiate the repayment of the BLBI with him”, said Sofjan.
“You get the idea”, said Liem “But how long will the others take?”
There are indeed some others willing to see how things play out and yet still some others who are not heeding the call. Samadikun Hartono, owner of Bank Modern, said that he worries this Bank Holiday means that his assets are about to seized.
Another appeared on television saying the following: “President Soeharto began the BLBI assistance but there were never any terms agreed to for us to repay the assistance so technically we don’t have to pay anything”. The show he appeared on was quickly flooded with calls from the audience calling him a “robber” and “thef”.
Ministers also began appearing on television. All declared that they supported the President’s measures. When asked what did the President want, all said that it’s the banking sector’s “move”.
The news caused furor in the international community all whom became concerned that the President was standing off with the banking sector in Indonesia. Calls were made between Washington DC, Tokyo, and Singapore to figure out how they should deal with the situation. In the end it was Canberra who stepped up. Prime Minister John Howard, in the middle of an election campaign, sent the unlikely duo of Minister for Foreign Affairs Alexander Downer and former Prime Minister Paul Keating to Jakarta.
The President received Downer and Keating accompanied by State Secretary Edi Sudrajat and Minister of Foreign Affairs Ali Alatas in the afternoon. With Keating keeping quiet, Downer said that Australia is concerned that Try has taken the step of ceasing all assistance towards Indonesia’s banks. He hopes that this step would not cause damage to Indonesia’s economic recovery.
Try explained at length the rationale behind his decision. He gave them a list of the 48 banks, a summary of their audit results and “the lack of effort made at repayment of the BLBI assistance”.
Downer tries again to persuade Try but it was to no avail. Try said that his economic policies had stabilized the currency and that his government had also negotiated a rescheduling of private debt in July where those who have received BLBI assistance would also receive advantage.
Keating remained quiet while Downer tried to protest.
“Why Mr. Downer”, began Try “I thought you in the western world with your free markets would understand the concept of letting economic crisis eliminate inefficient and, in our case, corrupt financial institutions. That’s what I’m doing with these 48 banks.”
“Mr. Keating do you have anything to say?” asked Downer.
“I don’t”, said Keating to Downer’s horror.
“Then we are done here. I have business to attend to as do you I’m sure”, said Try.
On the way back to the Australian Embassy, Downer was unhappy that Keating had kept quiet.
“Don’t you see it you goose?” asked Keating “Try hasn’t gone off the deep end. If he had he would have just gone ahead and taken more drastic measures.”
“Stopping to prop up your banking sector during the crisis isn’t drastic?” asked Downer.
“Only if Try didn’t put in place a Bank Holiday”, said Keating “No, he’s not doing anything drastic. He’s just making sure everybody else isn’t doing anything drastic.”
“What’s the end game?” asked Downer.
“Try wants to get this lot to the negotiating table and talk repayment terms”, said Keating brandishing the paper with the data that Try handed to him and Downer “And I think for all his tough talk, he wants us to help him get them there.”
*
Try reviewed the day’s events with Vice President JB Sumarlin, Mar’ie Muhammad, Soedradjad Djiwandono, Edi Sudrajat, and Deputy State Secretary Soedibyo Rahardjo. Edi said that if Keating is familiar with Indonesia enough, he’d know something is up.
Sumarlin said that he met with Deputy Prime Minister of Singapore Lee Hsien Loong. Lee is also worried that the President has lost his mind.
“And what did you say, Mr. Vice President?” asked Try
“I had to act all panicky and urgent but I told him you might just be pulled back from the brink if the owners of those 48 banks are brought to the negotiating table to talk about BLBI repayment”, said Sumarlin.
“Good”, said Try.
“In other news, the ranks of people wanting to negotiate are growing. Sofjan Wanandi is bound to drag a few with him”, reported Edi Sudrajat “Nirwan Bakrie and Fadel Muhammad are also now saying they want to negotiate their banks’ BLBI repayments.”
“Well, at least Ginandjar is using his influence for a good cause”, said Try.
Sumarlin, Mar’ie, and Soedradjad left leaving Try alone with Edi and Soedibyo.
“I don’t know what their game is”, said Try “Taking that much amount of money and then just casually hoping no one will notice or that they don’t have to pay it back.”
There was silence, before Soedibyo Rahardjo spoke up looking at the space in front of him very thoughtful.
“General Benny Moerdani appointed me as ABRI Chief of General Staff in January 1988, a month before you replaced him as Commander of ABRI, Mr. President.
A few days into my tenure, Tutut Soeharto wanted an appointment with me so I gave her the time of day.
Tutut requested that all the procurement of ABRI weapons be handled by her company. She said that President Soeharto has instructed it because weapons procurement could not be handled by just anyone. As a matter of fact, Tutut claimed, President Soeharto had ordered it.
I was aghast. I explained to her in great detail that what she was in effect asking me if she could take over the functions of 350 contractors. I was surprised that she asked that because I knew she was already a successful businesswoman at the time.
So I proposed to her, as a compromise, that she could have all contracts worth over $20 million dollars. But the rest can go to our existing contractors because we’ve got retired officers making a living working for those contractors. She rejected the offer.
Then I said to her “Come on, don’t you have enough money already?”
The meeting didn’t last long after that.”
Try and Edi listened intently to Soedibyo Rahardjo’s story.
“The point is, Mr. President, for these people there is no such thing as enough”, said Soedibyo “The only thing you can do now is stand strong for for the nation because not only do they think there is no such thing as enough."
----
The BLBI is a pretty fucked up for business. Essentially what happened was that Soeharto bailed out 48 Indonesian banks in October 1997. There were no mechanisms for the recipients of the bailout to repay back the funds and there weren't any conditions attached, all the assistance was just given as a matter of course. To this day the total amount there is still money owed to the government and some of the BLBI recipients have ran away overseas to avoid paying back the money they owed the government. It's all very complicated.
Soedibyo Rahardjo's story about Tutut is based on the following link (in Indonesian): https://historia.id/modern/articles/bisnis-senjata-keluarga-cendana-Pdjjg
18th September 1998:
President Try Sutrisno held a short cabinet meeting this Friday evening. There was only one item on the agenda and some instructions were given to the ministers.
At 8 PM, the President made his appearance at the Credentials Room of the Presidential Palace. It was from this room that he had had his oath first taken on the day of Soeharto’s death, where he had announced the Cabinet, and where he had announced the economic stimulus. Members of the press corps, cameramen, and photographers alike all focused on him.
“Assalamualaikum Warahmatullahi Wabarakatuh.
Fellow Indonesians,
The banking sector is an important sector in the functioning of our economy. Banks are the home the savings we have earned through hard work and from where we can readily access these funds when we need them. Banks also provide loans, which is what helps finance the commercial activities of various businesses of all sizes be they giant manufacturing conglomerates, medium sized family firms, and even smallscale home industries…
Last year the importance of the banking sector was such that the government initiated a program called Bank Indonesia Liquidity Assistance (BLBI). The BLBI assists banks in staying liquid so that it can fulfill its functions to the economy. So far, some Rp. 115 trillion rupiah has been injected to 48 banks in Indonesia.
Yesterday, I received a report from the BPKP regarding the results of external audits of both state and private banks which the government had commissioned four months ago. There are two things we can take away from this report:
*The first is that Indonesian banks regularly breach banking laws regarding legal lending limits especially with regard to lending to affiliates…
*Second and more importantly, is the indication that most of the funds which has been disbursed by the Bank Indonesia has been misused for purposes other than to keep the 48 banks which has requested such funds to keep themselves liquid. Calculations as to how much of these funds have been misused is still being finalized but the audit indicates that these funds have been used for such purposes as giving credit to affiliated companies, paying debt to third parties, currency speculation, overseas investment, and operational costs.
These funds have been disbursed out of acknowledgement that the banking sector is of vital importance to the economy…that an overwhelming majority of these funds have been misused constitute a gross breach of trust…
In light of these revelations and the fact that thus far only four banks are negotiating BLBI repayment agreements, I have taken the following steps:
-As has been announced by the State Secretary, beginning at the end of banking business hours today, banks in Indonesia will observe a Bank Holiday of a week. This means that there will be no transactions and no transfer of funds within banks or between banks and from inside or outside the country. I have taken this step to protect the economy and the savings of the Indonesian people from any rash steps by irresponsible elements.
-I also would like to announce that effective immediately, the government will cease the disbursement of all BLBI funds. It would not be in the best interest of Indonesia’s economic recovery and the Indonesian people as a whole if after seeing indication that the BLBI funds has been misused, this government chooses to do nothing…
I hope that the facts has been made clear to the Indonesian people whose interests I dearly wish to protect and those in the banking sector whose self introspection is much desired.
Assalamualaikum Warahmatullahi Wabarakatuh.”
Try left abruptly, leaving the press corps unsatisfied.
Not content, the press corps went around looking for more information. At the State Secretariat Building, Minister of Economics and National Development Planning Soedradjad Djiwandono, Minister of Finance Mar’ie Muhammad held a joint press conference.
“No assets has been seized or no banks have been nationalized”, said Soedradjad “There is only a bank holiday in which no transactions may be permitted.”
“What signal do you think the President is giving to the BLBI recipients?” asked a reporter.
“It is what it is”, said Mar’ie Muhammad “I think the President is signaling to people in the banking sector to think deeply about their actions. It’s their move now.”
The surprise for the press corps was the sight of Commander of ABRI Wiranto, Army Chief of Staff Agum Gumelar, Navy Chief of Staff Soeratmin, Air Force Chief of Staff Djatmiko, and Chief of Police Luthfi Dahlan dressed in fatigues.
“ABRI resolutely supports the measures announced by the President”, said Wiranto “It will station units from all four branches to help secure the nation’s financial institutions during the Bank Holiday”.
19th September 1998:
For those conglomerates who had received BLBI funds, it was a sleepless night. There were frantic phonecalls to officials to whom they are acquainted as well to each other.
Sofjan Wanandi, Chairman of Gemala Group and Owner of Bank Danahutama saw Liem Sioe Liong in person. Before Soeharto had died, Sofjan Wanandi had begun advocating for Try’s re-election as Vice President and had welcomed Try’s rise to power. Yet he never realized that Try would take this step.
“We’ve got to come to the table, we’ve got to come to the table and negotiate the repayment of the BLBI with him”, said Sofjan.
“You get the idea”, said Liem “But how long will the others take?”
There are indeed some others willing to see how things play out and yet still some others who are not heeding the call. Samadikun Hartono, owner of Bank Modern, said that he worries this Bank Holiday means that his assets are about to seized.
Another appeared on television saying the following: “President Soeharto began the BLBI assistance but there were never any terms agreed to for us to repay the assistance so technically we don’t have to pay anything”. The show he appeared on was quickly flooded with calls from the audience calling him a “robber” and “thef”.
Ministers also began appearing on television. All declared that they supported the President’s measures. When asked what did the President want, all said that it’s the banking sector’s “move”.
The news caused furor in the international community all whom became concerned that the President was standing off with the banking sector in Indonesia. Calls were made between Washington DC, Tokyo, and Singapore to figure out how they should deal with the situation. In the end it was Canberra who stepped up. Prime Minister John Howard, in the middle of an election campaign, sent the unlikely duo of Minister for Foreign Affairs Alexander Downer and former Prime Minister Paul Keating to Jakarta.
The President received Downer and Keating accompanied by State Secretary Edi Sudrajat and Minister of Foreign Affairs Ali Alatas in the afternoon. With Keating keeping quiet, Downer said that Australia is concerned that Try has taken the step of ceasing all assistance towards Indonesia’s banks. He hopes that this step would not cause damage to Indonesia’s economic recovery.
Try explained at length the rationale behind his decision. He gave them a list of the 48 banks, a summary of their audit results and “the lack of effort made at repayment of the BLBI assistance”.
Downer tries again to persuade Try but it was to no avail. Try said that his economic policies had stabilized the currency and that his government had also negotiated a rescheduling of private debt in July where those who have received BLBI assistance would also receive advantage.
Keating remained quiet while Downer tried to protest.
“Why Mr. Downer”, began Try “I thought you in the western world with your free markets would understand the concept of letting economic crisis eliminate inefficient and, in our case, corrupt financial institutions. That’s what I’m doing with these 48 banks.”
“Mr. Keating do you have anything to say?” asked Downer.
“I don’t”, said Keating to Downer’s horror.
“Then we are done here. I have business to attend to as do you I’m sure”, said Try.
On the way back to the Australian Embassy, Downer was unhappy that Keating had kept quiet.
“Don’t you see it you goose?” asked Keating “Try hasn’t gone off the deep end. If he had he would have just gone ahead and taken more drastic measures.”
“Stopping to prop up your banking sector during the crisis isn’t drastic?” asked Downer.
“Only if Try didn’t put in place a Bank Holiday”, said Keating “No, he’s not doing anything drastic. He’s just making sure everybody else isn’t doing anything drastic.”
“What’s the end game?” asked Downer.
“Try wants to get this lot to the negotiating table and talk repayment terms”, said Keating brandishing the paper with the data that Try handed to him and Downer “And I think for all his tough talk, he wants us to help him get them there.”
*
Try reviewed the day’s events with Vice President JB Sumarlin, Mar’ie Muhammad, Soedradjad Djiwandono, Edi Sudrajat, and Deputy State Secretary Soedibyo Rahardjo. Edi said that if Keating is familiar with Indonesia enough, he’d know something is up.
Sumarlin said that he met with Deputy Prime Minister of Singapore Lee Hsien Loong. Lee is also worried that the President has lost his mind.
“And what did you say, Mr. Vice President?” asked Try
“I had to act all panicky and urgent but I told him you might just be pulled back from the brink if the owners of those 48 banks are brought to the negotiating table to talk about BLBI repayment”, said Sumarlin.
“Good”, said Try.
“In other news, the ranks of people wanting to negotiate are growing. Sofjan Wanandi is bound to drag a few with him”, reported Edi Sudrajat “Nirwan Bakrie and Fadel Muhammad are also now saying they want to negotiate their banks’ BLBI repayments.”
“Well, at least Ginandjar is using his influence for a good cause”, said Try.
Sumarlin, Mar’ie, and Soedradjad left leaving Try alone with Edi and Soedibyo.
“I don’t know what their game is”, said Try “Taking that much amount of money and then just casually hoping no one will notice or that they don’t have to pay it back.”
There was silence, before Soedibyo Rahardjo spoke up looking at the space in front of him very thoughtful.
“General Benny Moerdani appointed me as ABRI Chief of General Staff in January 1988, a month before you replaced him as Commander of ABRI, Mr. President.
A few days into my tenure, Tutut Soeharto wanted an appointment with me so I gave her the time of day.
Tutut requested that all the procurement of ABRI weapons be handled by her company. She said that President Soeharto has instructed it because weapons procurement could not be handled by just anyone. As a matter of fact, Tutut claimed, President Soeharto had ordered it.
I was aghast. I explained to her in great detail that what she was in effect asking me if she could take over the functions of 350 contractors. I was surprised that she asked that because I knew she was already a successful businesswoman at the time.
So I proposed to her, as a compromise, that she could have all contracts worth over $20 million dollars. But the rest can go to our existing contractors because we’ve got retired officers making a living working for those contractors. She rejected the offer.
Then I said to her “Come on, don’t you have enough money already?”
The meeting didn’t last long after that.”
Try and Edi listened intently to Soedibyo Rahardjo’s story.
“The point is, Mr. President, for these people there is no such thing as enough”, said Soedibyo “The only thing you can do now is stand strong for for the nation because not only do they think there is no such thing as enough."
----
The BLBI is a pretty fucked up for business. Essentially what happened was that Soeharto bailed out 48 Indonesian banks in October 1997. There were no mechanisms for the recipients of the bailout to repay back the funds and there weren't any conditions attached, all the assistance was just given as a matter of course. To this day the total amount there is still money owed to the government and some of the BLBI recipients have ran away overseas to avoid paying back the money they owed the government. It's all very complicated.
Soedibyo Rahardjo's story about Tutut is based on the following link (in Indonesian): https://historia.id/modern/articles/bisnis-senjata-keluarga-cendana-Pdjjg