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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

SEPTEMBER 3, 1999 VOL. 25 NO. 35

FOLLOW THE MONEY
Asiaweek's guide to 'Bali-gate'


What is 'Bali-gate'?
The scandal involves a $72.8-million payment by Bank Bali to two businessmen linked to the Golkar party. In return, the bank hoped to ensure the recovery of $120 million owed it by three failed banks. Because interbank loans are guaranteed by the government, no commission should have been paid. Critics say much of the funds went into Habibie's re-election war chest.

Why did Bank Bali need the $120 million so desperately?
Back in late 1998 when the saga began, Bank Bali was failing. It needed $320 million to keep operating. To qualify for a bailout, Bank Bali had to come up with 20% of the $320 million by July 22, 1999. Otherwise, IBRA would take it over. Rudy Ramli, whose family controlled the bank, was desperate to reduce its recapitalization burden by reclaiming the $120 million in credits.



    ALSO IN ASIAWEEK
Bank Bali
The seedy side of Indonesian business turns ugly

Why didn't Ramli invoke guarantees on debts of failed banks?
Though there were state guarantees on all bank debts and deposits, back in 1998 it was up to failing banks to ask for state funds to cover claims against them. Bank Bali's debtors had already been suspended and seized by IBRA, so Ramli was out of luck. In May 1999, IBRA changed the regulations, allowing creditors like Bank Bali to invoke the guarantee. But by then Ramli was already locked into the ill-fated deal with the "brokers."

So how did the alleged scam happen?

 • January: Bank Bali signs a deal giving ownership of the $120 million in loans to firms under Joko Chandra and Setya Novanto, Golkar-linked businessmen, who promise to collect the debt.

 • February: Bank Indonesia Governor Syahril Sabirin, State Enterprises Minister Tanri Abeng and Supreme Advisory Council chief A.A. Baramuli, among others, allegedly meet with a Bank Bali executive, assuring it an easy ride in recovery of its credits.

 • May: Ramli asks Finance Minister Bambang Subianto for his help in canceling the deal with Chandra and Novanto. Subianto arranges a meeting with Habibie associates. But Chandra refuses to cancel the arrangement.

 • June: Under the new regulations, IBRA approves the release of the $120 million, which Chandra and Novanto control under the deal with Bank Bali. Ramli deposits $72.8 million into Novanto's account. He and Chandra disperse the money among more than 20 accounts, including some linked to a Habibie man.

 • July: In discussions with IBRA to buy 20% of Bank Bali, Standard Chartered reports irregularities, including the writeoff of $72.8 million of the $120 million received as debt payments.

 • August: A lawyer discloses that the missing money is in accounts of businessmen linked to Golkar. The IMF calls for a full investigation, including the central bank. On Aug. 19, the "commission" payment is returned to Bank Bali. IBRA agrees to an independent audit of its actions. MPs demand the resignation of Finance Minister Subianto and other officials.




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