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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

SUHARTO'S KISS OF DEATH

Seen as a crony bank, BCA tries to stem a run


WHEN RUMORS THAT LIEM Sioe Liong had died circulated in Jakarta last year, depositors rushed to take out their money from Bank Central Asia. A close associate of then-president Suharto, Liem owns 69.46% of Indonesia's largest private bank, with two Suharto children controlling 30%. BCA regained customer confidence when the death reports were proved to be unfounded. But Suharto's political demise in May sparked another bank run. Rioters had torched Liem's Jakarta mansion, damaged 122 BCA branches and destroyed 150 ATMs. "I don't trust this bank anymore," says Rudi Setiadi while waiting to take out his savings. Local bankers estimate that depositors have withdrawn up to 16 trillion rupiah ($1.4 billion) since May 18.

And counting. The Indonesian Bank Restructuring Agency (IBRA) took over BCA's management on May 28 and assured everyone that the new government of President Bacharuddin Jusuf Habibie will continue to guarantee all bank deposits. But the panic did not subside. "In people's minds, BCA is tainted with the [Suharto] family's ownership," says Mark Jones of Thomson BankWatch. Suharto's son Sigit Harjojudanto and daughter Siti Hardiyanti Rukmana, also known as Tutut, are rumored to be selling their shares. Because of the anti-Suharto sentiment, another son, Bambang Trihatmodjo, recently resigned from leading conglomerate Bimantara Citra, but will keep his 38.17% stake.

On paper, BCA is among the healthiest of Indonesia's more than 200 banks. "It has [788] branches all over the country," says Manuel Sia, vice-president of rival Bank Internasional Indonesia. "Its funding comes from a large number of small depositors, which contributes to stability." BCA has 8 million customers. Its 1997 paid-up capital of 1 trillion rupiah ($192 million) more than tripled to 3.5 trillion rupiah after Anthony Salim, the Liem son who runs most of his father's businesses, injected fresh funds in May to shore up the bank. But all that counts for nothing in the new Indonesia, where having close connections to Suharto has become a kiss of death. The jewel of Liem's empire, Indofood Sukses Makmur, saw its share price drop 31% on May 27. It was down another 6.5% June 3.

The BCA debacle deals a big blow to Liem's conglomerate - the bank plays a crucial role in directing funds to group members. Indofood has some $1 billion in foreign-currency loans while another major unit, Indocement, borrowed $830 million. Those loans are impossible to repay given the rupiah's volatile swings - the currency was trading at 11,500 to the U.S. dollar June 3 (versus 2,400 to the greenback in July last year). Liem's overseas holdings are under pressure too. Property-and-telecommunications group Metro Pacific is taking a beating in the Manila stock market, as is conglomerate First Pacific in Hong Kong.

If the run on BCA is not stemmed, IBRA will need to draw more money from government coffers. The agency has already pumped 124.6 trillion rupiah ($11 billion) into BCA and the seven other banks it has also taken over. (IBRA is overseeing the operations of 37 other institutions.) Jakarta may start printing money to prop up the banks, if it has not done so already. That would worsen inflation, which is forecast to soar to 80%-85% this year. "It's a dilemma," says Sia. "If the government does not help the banks, there could be more social unrest. If they do, people will simply take out their money" - to spend, put under their mattress or deposit in foreign banks. There are no easy answers in today's Indonesia.

- By Yenni Kwok/Jakarta


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