Monday, February 13, 2006 Vincent Lingga, The Jakarta Post, Jakarta
The rationale and pragmatism of the government's intention to protect big debtors from criminal charges -- if they fully resolve their debts to the state -- is similar to the idea of a nationwide tax amnesty proposed by the business community.
The tax administration system is deemed incapable of catching all big tax evaders. A tax amnesty is, therefore, designed as bait to lure registered and potential taxpayers to declare all their wealth or assets.
But the offer of discharge and release for big debtors could easily be seen as an insult to the public's sense of justice. How could people, who should be blamed partly for the 1998 economic crisis, get such nice treatment.
The government, however, seems to be pragmatic enough to realize that bringing the big debtors to court not only would be quite arduous and time-consuming, but would not guarantee that the verdicts would truly mete out justice. The integrity and competence of the existing court system to deal with cases involving complex financial transactions is also a big question.
Just witness how the four big debtors, apparently frustrated with their futile search for justice, last week visited the President's office to express their grievances about the poor behavior of our law enforcement institutions.
Predictably, they were not able to meet with President Susilo Bambang Yudhoyono, but their complaint of being extorted by public prosecutors is simply further confirmation of how corrupt our justice system remains, despite the concerted antigraft drive.
In fact, it was the "bombed-out" court system that had in the first place prompted then president B.J. Habibie in 1998 and 1999 to opt for an out-of-court settlement to get optimum debt collection.
Habibie then was greatly concerned about two big risks: The integrity and capability of the judiciary system to handle so large a number of big cases and the probability that the debtors, who had received Rp 144.5 trillion (US$14.5 billion) in emergency liquidity loans from Bank Indonesia during the height of the crisis in late 1997 and early 1998, would hide or get rid of their assets during the long court process.
The Habibie administration therefore acted firmly to offer the debtors a discharge and release of criminal charges as bait to make them willing to cede their assets, whose value was estimated to be equivalent to their respective debt to the state. More than 15 big debtors accepted the offer, resolved their debts once and for all and got immunity from criminal prosecution.
Despite their shortcomings and questionable clauses that later put the subsequent governments in a dilemma, the debt-settlement agreements concluded under Habibie seemed to be the best deal that could have been gained during that time of crisis.
That the government eventually could recover only a fraction (between 20 and 30 percent) of the book value of the assets was quite a different issue. The market value of the assets depended not only on their book value and quality, but also on the prevailing political and economic condition and on how the Indonesian Bank Restructuring Agency managed the assets.
The idea of releasing cooperative debtors from criminal prosecution was revived by the government last week, but it just seems odd to many people. That is because the government is now in a much better position -- given the political and economic stability -- to negotiate better deals with the debtors.
Legal action against debtors, who have ceded their assets to the government, could cause messy litigation procedures, which would jeopardize the legal status of the assets, many of which have already been sold to new investors. This, in turn, could consequently sabotage the whole asset-recovery process conducted by the now defunct Indonesian Bank Restructuring Agency.
Yet more apprehensive is that legal actions would still have to go mostly through a protracted process in our courts, which remain largely as corrupt and as technically incompetent ever -- including those that ruled in favor of the debtors years ago.
It is worth remembering that even IBRA, which was then vested with quasi-judicial powers that made its legal actions similar to court orders, was rendered impotent as most of its decisions or legal claims had been rejected by either notoriously corrupt judges or incompetent judges who are not familiar with complex corporate transactions.
But for out-of-court debt-settlement deals to be credible and politically acceptable, the debtors should be able pledge assets equivalent in value to their debts, and the government should be able to verify the legal documents and assess the real value of the ceded assets before closing any deals.
Equally important is that uncooperative debtors must be incarcerated for a long time.
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