Century Probe ‘Keeping Economy From Shifting Gears’

Indonesia is losing precious economic momentum due to the amount of political uncertainty resulting from the House of Representatives’ investigation of the Bank Century bailout, financial analysts and business experts said on Tuesday.

Sofyan Wanandi, chairman of the Indonesian Employers Association (Apindo), said the business community was especially worried about the uncertainty created by the possibility that the House’s special committee is considering launching impeachment procedures against Vice President Boediono.

Boediono was the governor of the central bank in November 2008 when it sanctioned the rescue of Bank Century, which was looted within weeks of the Rp 6.7 trillion ($710 million) government bailout.

“Businesspeople will take a wait-and-see approach regarding expanding their businesses in Indonesia,” Sofyan said. “They are disappointed with the lost momentum because of what they see as weak leadership by the president in allowing this matter to be prolonged. It all depends on him now.”

The House committee’s finger pointing at Finance Minister Sri Mulyani Indrawati — a favorite with the international business community — has also created concern. Sri Mulyani said she had agreed to the bailout based on figures provided to her by the central bank.

During questioning by the committee, former Vice President Jusuf Kalla said Sri Mulyani had told him that she had felt misled by the data presented by the central bank, which had originally forecast that it would not cost more than Rp 632 billion ($ 67.6 million) to rescue Bank Century . Sofyan added that talk of a possible cabinet reshuffle is contributing to the general uneasiness over the political nature of the Century probe.

Eric Alexander Sugandi, an economist at the Standard Chartered Bank Indonesia, called for a speedy conclusion to the Century investigations, which include one by the Corruption Eradication Commission (KPK). Eric said that dragging the case out would cause investors to worry.

“Fitch Ratings has just upgraded our country’s rating but prolonging the probe could have a negative effect on the economy,” Eric said. “Investors, nevertheless, still see potential in the Indonesian economy.”

Fitch Ratings last month upgraded the country’s sovereign debt to ‘BB+’ from ‘BB’ with a “stable outlook,” citing the country’s resilience amid the global financial crisis and management of the state budget.

Indonesia is now only one step away from reaching Fitch’s “investment grade” rating. The ratings reflect the perceived risk in lending to the government and if the rating is raised to investment grade the government would be able to borrow at lower interest rates.

Eric said investors would become seriously concerned if the Century probe resulted in impeachment moves against President Susilo Bambang Yudhoyono.

“Impeaching the president would have considerable effect on the economy. That will cause even greater uncertainty for investors,” he said, adding that “fortunately” the political parties don’t seem to be heading in that direction. Yessar Rosendar, Muninggar Sri Saraswati

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