Before you proceed to read this article by Bill Guerin published in Asia Times Online on 2 May 2007, you may wish to read my post from last year titled A Safe Haven For The Rich & Crooked To Stash Their Money?😉

Indonesia seeks lost trillions in Singapore
By Bill Guerin

JAKARTA – Indonesia and Singapore last Friday sealed a bilateral extradition pact, opening the way for Jakarta to apprehend and try the many wayward business people and bankers who allegedly stole untold billions of dollars’ worth of assets from the country and parked them in Singapore in the wake of the 1997-98 Asian financial crisis.

Successive Indonesian administrations have been stymied in their pursuit of footloose white-collar criminals, many of whom Jakarta contends have fled and taken refuge in neighboring Singapore. Singapore has long denied the charges and refused to sign the extradition treaty unless Indonesia agreed to a concomitant defense treaty, which will expand on the previous Military Training Area bilateral arrangement that began in 1995 and ran through 2003.

As part of the deal, Indonesia will provide land, sea and airspace within its jurisdiction for Singapore’s land-constrained armed forces to conduct training exercises. Singapore said that treaty-enhanced defense cooperation, frozen since 2003 partly because of the island state’s reluctance to sign an extradition treaty, will help both countries cope better with disasters and security threats. More significantly, perhaps, the deal comes as diplomatic ties with Thailand, which has long provided land and space for Singapore to conduct military exercises, have come under severe strain.

The deal represents a diplomatic victory for Indonesian President Susilo Bambang Yudhoyono, who had earlier tasked his Attorney General, Abdul Rahman Saleh, to take his high-profile war on graft outside Indonesia and pursue known fugitives abroad. Saleh has followed through by reopening a stalled investigation into crimes linked to the misuse of funds at the Bank Indonesia Liquidity Assistance (BLBI), which at the height of the 1997-98 crisis disbursed huge amounts of cash to liquidity-starved banks.

In a report commissioned by the House of Representatives, the Supreme Audit Agency found that Rp138 trillion (US$15.2 billion), or nearly 95% of the Rp144.5 trillion the BLBI held at the time in funds, had been channeled by improper procedures and then misused by the recipient banks, including those owned by cronies and relatives of former president Suharto.

The report said bankers had illegally used the money for currency speculation, loans to affiliated business groups, repayment of subordinated loans, and personal securities transactions. Many of those banks were later closed down by the government, while others were taken over by the Indonesian Bank Restructuring Agency. Several of the complicit bankers fled the country and allegedly took up residence in Singapore.

Most wanted list

Indonesian authorities have a list of financial fugitives who they believe fled with their ill-gotten gains to Singapore. Near the top of that list is Bambang Sutrisno, former vice president of the now-defunct Bank Surya, who was tried in absentia and convicted in November 2002 on charges of embezzling Rp1.5 trillion in BLBI funds. He and the bank’s former president, Andrian Kiki Ariawan, were both sentenced to life imprisonment.

Sudjiono Timan, former president director of state-owned venture-capital investment company PT Bahana Pembinaan Usaha Indonesia (BPUI), is also believed to be residing in Singapore. He disappeared soon after state prosecutors moved to arrest him at his home after handing down a 15-year prison sentence in a Rp1.1 trillion corruption case where he allegedly channeled state funds to Suharto’s cronies.

Backed by the Finance Ministry and Bank Indonesia, the investment company had run up debts of more than $1 billion owed by various corruption-tainted tycoons. Apparently among them was Agus Anwar, the former owner of Bank Pelita and Bank Isitimarat, who stands accused by state prosecutors of embezzling Rp3.2 trillion in state funds, including Rp700 billion from BPUI. He, Indonesian prosecutors contend, was granted Singaporean citizenship in late 2003.

Not all the fugitive cases are linked to the 1997-98 Asian financial crisis, however. Maria Pauline Lumowa, owner of PT Gramarindo Mega Indonesia, is the suspected mastermind of a Rp1.7 trillion letters-of-credit scam run through state-owned Bank Negara Indonesia between December 2002 and July 2003, according to state prosecutors. She fled to Singapore before her trial, they say. Irawan Salim, former president director of Bank Global, is suspected of involvement in the issuance of fictitious loans and bonds worth at least Rp830 billion. He fled Indonesia in December 2004 just days before the bank was closed and, according to various news reports, has been sighted in Singapore. Another fugitive, Lidia Mochtar, is wanted over the alleged embezzlement of Rp202.8 billion from Bank Tamara and is likewise believed to be living in Singapore, according to Indonesian prosecutors.

All told, white-collar Indonesian fugitives have allegedly spirited billions of dollars’ worth of assets out of the country. Indonesia’s Financial Transactions Report and Analysis Center last year cited reports from the country’s embassy in Singapore that at least 200 debtors who owe money to the state had been sighted in the island state since Suharto’s 1998 downfall.

Some of Indonesia’s best-known tycoons, who at least so far are not linked to any criminal investigations, owe massive amounts of money to Indonesian financial institutions but continue to live the high life in Singapore, prosecutors say. Vast amounts of legitimate funds were also parked in Singaporean banks by Indonesian business people who fled the violence against the country’s ethnic-Chinese minority in May 1998.

Mushrooming millionaires

Yudhoyono’s government has since launched a charm offensive to try to woo the money back to what his officials pitch as a more politically and economically stable Indonesia. According to a statement issued last October by US investment bank Merrill Lynch, Indonesians based in Singapore own assets worth $87 billion – or an aggregate wealth equivalent to some Rp850 trillion – or, in comparative terms, Rp200 trillion more than the Rp650 trillion annual national budget spent by the government for Indonesia’s 228 million population.

Singapore’s US-dollar-denominated millionaire population is growing faster than anywhere else in the world, with about 55,000 of them in a population of about 4.5 million. About one-third of Singapore’s known millionaires are Indonesian nationals, many of whom reportedly have recently been granted Singaporean citizenship. Singapore allows permanent-residency status to Indonesians – and any other foreigners – who deposit the equivalent of Rp45 billion in a Singaporean bank.

Those hefty cash inflows, which have given the island state’s financial services sector a big lift, had to Jakarta’s mind made Singaporean officials reluctant to agree to the proposed extradition treaty. In a tit-for-tat response, Indonesia this year slapped a ban on exports of sand to Singapore – which the island state uses in reclamation and construction projects – for its perceived foot-dragging on the extradition issue.

“Singapore often says there’s so much corruption in Indonesia,” said Indonesian vice president Jusuf Kalla in a February interview. “But when we want to work together on combating corruption, they don’t want to.”

Some in Singapore, on the other hand, wonder whether extradited Chinese-Indonesians would receive a fair trial from the country’s notoriously pliable judiciary. They note that corruption charges still must be proved and any case will have to be legally airtight to secure an extradition order in Singapore, which can only be approved by a magistrate there and only if the request complies with every detail of Singapore’s Extradition Act.

For Yudhoyono, the extradition treaty has significant political implications. As a new general-election season approaches, failure to net at least some of the most wanted BLBI suspects would represent a significant setback for his government’s high-profile anti-graft drive – which is viewed by many Indonesians as one of the strongest points of his three-year-old presidency.

Yet it’s not clear that the extradition treaty with Singapore will be the silver bullet his administration desires. Nobody will be extradited until the extradition and accompanying bilateral defense agreements have been ratified by Indonesia’s House of Representatives. Several opposition legislators have slammed the defense treaty in broadcast and print media interviews, saying Indonesia had “given away too much” in defense concessions for what could prove to be a toothless extradition treaty.

Indeed, even if the treaty passes Parliament, it may prove more symbolic than substantive in retrieving lost trillions of rupiah-denominated state funds. Political analysts note that those on the lam in Singapore still have plenty of time to weigh their options and consider taking their ill-gotten gains to a third welcoming country. Singapore’s founding father and mentor minister Lee Kuan Yew has already insinuated as much. “It’s laughable. Do you believe that any Indonesian who was likely to be extradited would be here at all?” he was last week reported as saying.

Bill Guerin, a Jakarta correspondent for Asia Times Online since 2000, has been in Indonesia for more than 20 years, mostly in journalism and editorial positions. He specializes in Indonesian political, business and economic analysis, and hosts a weekly television political talk show, Face to Face, broadcast on two Indonesia-based satellite channels. He can be reached at softsell@prima.net.id.