Gayus Tambunan & A Sense of Humour...

When one is facing some time in the 'big house' it is important to maintain a sense of humour in facing such circumstances. Gayus Tambunan, the tax officer at the centre of a corruption scandal that touches a lot of the big names in Indonesian politics and business, in his final plea to the South Jakarta District Court asked to be made a member of the expert staff of the Chief of Police.

His plea also suggested if not the Chief of Police then he could produce equally excellent outcomes as an expert staff member at either the Office of the Attorney General or at the Office of the Head of the Corruption Eradication Commission (KPK).

With a bit of luck Gayus will see the inside of a jail cell for the crimes he has committed. By his own admission he is a corruptor. Hopefully, this time he will be afforded the opportunity to stare at the walls for 23 hours a day rather than enjoy jaunts to the tennis or overseas to Singapore, Thailand, Macau, or Mainland China.

The rest of the plea focused on how he was but a bit player, a small fish, in the corruption scheme and he fully supports the president, SBY, in his drive to eradicate corruption from the Republic of Indonesia. The cynic in me says, "of course you do!" Let's face it, you have been caught. If you had not been caught out then in all likelihood you would still be trying to fleece big business using the schemes that made you so much money in the first place.

To suggest that you have now seen the error of your ways and support the anti-corruption drive is nothing more than a desperate cry from a desperate man. Where was your support for the president's anti-corruption drive when you were bribing judges, police and prison guards?

Nevertheless, the funny in the plea was the request to be made an expert staff member of the Chief of Police. However, Gayus seemed serious in his claim that if he was made an expert staff member of the Chief of Police then he would be instrumental in eradicating corruption within two years. Gayus, not only do you have a sense of humour, but you also have a wonderful imagination. Seriously, Gayus, what makes you think you can achieve what so many others have failed to achieve since 1998?

Sri Mulyani Indrawati went hammer and tong to ensure that corruption and the culture of corruption was torn down in her spheres of influence when she was a minister. Her reward was to be hung out to dry by the president. In a shrewd move she is now at the world bank (there is more than one way to skin a cat - that is the saying, right?).

With a bit of luck Gayus you will receive a sentence that will afford you many years to think about your fantasy. Alternatively, you could write a confessional, tell all, name names autobiography about your 15 minutes of fame as a corrupt tax official that titillated the odd Indonesian with your international travel itinerary from your pre-conviction detention days.

Has Indonesia Turned the Economy Corner?

I really should get back to writing more dry analysis of business and economics news and the legal frameworks that impact those two areas in Indonesia. Sometimes, I miss writing for a captive audience. My previous life at hukumonline.com afforded me that opportunity.

The amount of money coming into Indonesia through 2010 is the most to be placed since 1998. The amount is a rather impressive USD 23.3 billion. This has been driven by consumers and resources. However, it is interesting that some are suggesting that the biggest factor in this surge of investment is thanks to President Susilo Bambang Yudhoyono (aka SBY). According to those in the know, foreign lawyers, the resurgent confidence is directly related to SBY's ability to fight corruption and terrorism combined with his drive to raise the levels of spending on critical infrastructure.

To be honest, I am not sure that a lot of others, who would also consider themselves to be in the know would agree with this assessment. There is no doubting that the Indonesian economy is going great guns in terms of investment. This might just as easily be attributed to the idea that some investors have reached a point where any risk is justified by the potential returns. It may be that it is simply no longer an option to wait and see and get left behind.

The idea that corruption is under control and that the Indonesian judiciary is sufficiently reformed to make business transactions certain is tantamount to burying one's head in the sand. A recent speech by the former Finance Minister of Indonesia, Sri Mulyani Indrawati, highlighted just how prevalent corruption is and how much of a threat it still is. I would argue she might know about these things, particularly when one considers most people believe that she moved to her current position at the World Bank after getting worked over by Aburizal Bakrie and a compliant SBY when she sort to clean house at the tax office.

The judiciary is still a long way from being an organisation that provides legal certainty to business players. Judges are still on the take. Police officers and prosecutors are also on the take. The recent case of Gayus Tambunan and his ability to get out of jail highlights.

Nevertheless, the surging business environment is providing plenty of legal work, and the numbers of accredited foreign lawyers working in Indonesia has risen from 20 to 50. I will need to make some calls and get the relevant data to substantiate this because as I recall there were like 40-odd accredited lawyers in the beginning of 2009. All foreign lawyers must be accredited through the Indonesian Bar Association (PERADI) if they are to work in Indonesia. It is worth noting that there are a significant number of foreign lawyers in Indonesia who are not accredited by PERADI. This is achieved through technicalities as the foreign lawyer is not employed as a lawyer, but rather in some other capacity.

With all these things to be considered, the question is "has Indonesia turned the economy corner?"

Look Whose Smiling Now...Will it Last?

There are some things that just beggar belief and then there are those things that just seem too stupid for words. But, any of you that have read this blog will know that I am rarely stuck for words even when things seem to be too stupid for them.

Comm. Gen. (Police) Susno Duaji found time to make a visit to the Corruption Eradication Commission (Komisi Pemberantasan Korupsi / KPK) to get an update, or as he would prefer to call it, a clarification. Why is this too stupid for words? Anyone who thinks a little bit about this situation will see that this is nothing short of a very public attempt at intimidation. Duaji is saying, "You wanna mess with me, then you end up a suspect, and out of a job!"

This sort of behaviour is reminiscent of a Mafioso made man. It is the behaviour of a man who thinks his back is covered and he is protected. Just sometimes, and only sometimes, these are the people that are most exposed. If for no other reason than they are expendable as the bigger fish look to tie off any loose ends.

By putting himself front and centre on this one, Duaji also becomes the most likely to take the fall or become the scape goat when this whole affair goes pear-shaped. And, it will go pear-shaped, and perhaps soon.

The focus here needs to be only on Duaji at this point in time. Somehow, I believe that there are plenty of people who would share my belief that Duaji wants it no other way.

This post does not lend itself to a very long expose. The spat between the KPK and Duaji, and perhaps the Police, is long on details. Nevertheless, there are a few pertinent details that are worth repeating, along with some educated speculation about why it came about in the first place. It is also worth noting that this is bigger than one man and a couple of state institutions in the form of the KPK and the police.

There are others involved here. This case involves a traceable money trail and it goes without saying that perhaps the Indonesian Financial Transactions Reports and Analysis Center (Pusat Pelaporan dan Analisis Transaksi Keuangan / PPATK) uncovered a trail of cash and other illicit payments that may implicate a number of those individuals that seem intent on shutting down any KPK investigation into Bank Century, and by default Bank Indonesia (Indonesian Central Bank).

Interestingly, if this case does involve BI, and it seemingly does, then who would be involved at that level? When the Bank Century bail out was being discussed and ultimately approved, the Vice President-elect was at the helm. One would have to wonder whether or not there is going to be a concerted effort to shield the VP-elect from any fallout that may eventuate. So, in that case, who takes the fall? Sri Mulyani Indrawati?

It would also seem that the Office of the Attorney General is intricately and intimately involved in the process of facilitating this fiasco. There is plenty already in the public record that suggests that, at least, at the second tier level of AGO officials there was a concerted effort to facilitate an end to the Anggoro Widjojo investigation.

This is a case that will unravel because their are too many hands in the cookie jar.

There is little doubt that Duaji has gone "balls to the wall" on this one. He is investing everything that he has to protect his interests, and perhaps the interests of some others as well. So much so that there are clear breaches of the police code of ethics with respect to the abuse of authority and in terms of more technical aspects of police officers doing their duty and fulfilling their obligations as officers.

It is time that the Chief of Police and the President became more pro-actively involved in this issue. The Chief of Police must stand Duaji down until the investigations are complete.

The potential for this mess to become even uglier and dirtier is huge. Sometimes it is worth while just sitting back and thinking about how big this case has become and how big it is likely to become.

Is it big enough to bring down SBY? Who knows? What does seem certain is that more heads are going to roll!

(Photo courtesy of here)

Sri Mulyani Indrawti -- Governor of the Indonesian Central Bank?

Politics in Indonesia is a strange animal and even stranger are the motivations of those that play. The latest rumor or perhaps a little more than rumor now that the incumbent president, Susilo Bambang Yudhoyono or SBY to his friends, has said that he is considering it, is the selection of Sri Mulyani Indrawati (photo) as the prospective Governor of Bank Indonesia (Indonesia's Central Bank).

Sri Mulyani is one of SBY's best performing Ministers, if not his best performing Minister. She holds the Finance Portfolio and since the former Coordinating Minister of Economic Affairs, Boediono, was appointed to Bank Indonesia, she has held that portfolio as well.

She is a world class reformer and has made significant inroads into reforming the bureaucracy. She is generally considered to have been successful in her role and been a driving force in cleaning up her department.

Why is it that her appointment to Bank Indonesia is problematic when Bank Indonesia is also an institution that could benefit from her reforming ways? Well, the move reeks of marginalizing the competition and a real shaker and mover on the agenda of reform. A move to Bank Indonesia takes Sri Mulyani out of the majority of the policy areas that she has been so intimate and successful in to date. Almost certainly leading to a waning of her influence in real and broad reforms.

The move is a backward step for those interested in the bureaucratic reform of government. This is not to say that there are not worthy candidates to replace her, there are. This is a backward step because whoever replaces her would have to work twice as hard to develop the gravitas she has acquired during her time in the position. If SBY, and Boediono, are serious then the most sensible move would be, assuming SBY and Boediono win the presidency and vice-presidency, is to make Sri Mulyani the Coordinating Minister of Economic Affairs in the next SBY Government.

There is little doubt that Sri Mulyani would be appointed to the position of Governor of Bank Indonesia if she were proposed as a candidate. Her confirmation through the Indonesian House of Representatives (DPR) would not likely encounter much resistance, if any.

Bakrie -- Will They or Won't They?

The Indonesian Stock Exchange (IDX) announced on Wednesday (5/11) that they were going to lift the suspension on trade that had been in effect on PT Bumi Resources. However, not long after this announcement was made, and presumably a few phone calls later, another announcement was made. The second announcement was that the suspension in trade would remain in force.

The issue is seemingly becoming less transparent and more complex. The press release issued by the Bakrie Group of Companies suggested that the deal was between Northstar and Bumi Resources with a number of SOEs also buying into the USD 1.3 deal. Word on the street is that the role of the SOEs is far from certain as is any stake they might take up. It seems that the current state of affairs is that there is a tentative deal in place for Northstar to provide finance.

In terms of the announcements, there are relieable sources suggesting that the current Coordinating Minister of Economic Affairs / Minister of Finance, Sri Mulyani, was in favour of lifting the suspension. This would suggest that the subsequent announcement to reinstate the suspension came from someone higher up the food chain. This would most likely be the President.

It is unlikely to be the Vice President. Simply, the more trouble Bakrie is in the easier it will be for Kalla to exert his influence over Golkar. It is reported that the current President ascended the top job in part because of funds supplied by Bakrie (this might explain the loyalty shown to one of cabinet's most poorly performing Ministers). The reality is that the deeper the hole Bakrie finds himself in the less likely it is that he can be King or Queen Maker in the upcoming elections.

Nevertheless, the mere fact that the government became involved in the lifting of the suspension is a loser in the "court of public opinion", as it will be seen as protecting the interests of a cabinet Minister and not about protecting the interests of the State. Whether this is true or not is irrelevant in the court of public opinion, if it smells bad and it looks bad, then it is bad! The fact that the presidential spokesman comes out and says that Bakrie companies are not his concern is hardly reassuring.

That said, the logic on keeping the suspension in place is that as soon as the suspension is lifted it is likely people holding Bumi shares will seek to offload even with a purported deal in place.

The deal between Northstar and Bakrie plus the SOEs is supposed to be complete within 28 days. I wonder whether the suspension will stay in place until the deal is signed, sealed, and delivered?

Ah, must be nice to be the Coordinating Minister of the Bakrie Family Welfare, oops I meant to say the Coordinating Minister of People's Welfare (photo -- always smiling and why wouldn't you be?).

Where There's Smoke...

This is the sort of political gossip that makes the intrigue all the more fun. This is not to suggest that this is not a serious matter if it were to be true. Rather, can the President really be that stupid to cave into the pressure if it is there? The old saying (or is it a cliche now) that where there is smoke, there is fire might ring true here.

It seems that the rumor mill has been running in earnest over the past couple of weeks that the pressure is on the Minister of Finance (and doubling as the Coordinating Minister of Economic Affairs), Sri Mulyani Indrawati, as the global financial crisis unravels and seemingly unravels one of Indonesia's biggest corporate groups. The rumor goes Aburizal Bakrie, who just happens to be the Coordinating Minister for Peoples Welfare, called and the Finance Minister said, No!

The issue seems to be Mulyani's refusal to entertain the idea of a bailout for the Bakrie group. Fair enough, it is a little bit rude to create a mess and then expect someone else to come in a clean it up with a sweetheart deal. However, the government is likely to buy into the Bakrie companies on the market and make some serious cash on the deal. The fundamentals of the Bakrie companies involved are reportedly pretty solid in terms of the assets they hold.

The problem is that they leveraged their premier shares against a USD 1.2 billion loan. Not such a problem except that the bottom fell out of the market and thus the leveraged shares are no longer worth what they once might have been. Now, that there are loans due and others due real soon, the pressure is on.

Andi Mallarangeng, one of the President's spokespeople, has said he is surprised by the gossip and that there is no truth to it. According to Mallarangeng, the Finance Minister has "the full backing of the President".

Does this put an end to the smoke and put out the fire? I suppose we will find out soon enough.