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Loans turn political as House hassles banks
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State-Owned Enterprises Minister Rini Soemarno (back, second left) witnesses the signing of a loan partnership between China Development Bank vice chairman Zheng Zhijie (front, second right) and Indonesian state-owned banks represented by BRI president director Asmawi Syam (front left), Bank Mandiri president director Budi Gunadi Sadikin (front, second left) and BNI president director Achmad Baiquni (front right) in Beijing on Sept. 16, 2015. (Antara/Rini Utami)
W
hat appeared to be a normal corporate action by state-run banks in accepting US$3 billion in loans from China has become political theater as legislators suspect foul play and have insisted on more rounds of questioning.
In its third hearing on the subject on Monday, the House of Representatives once again grilled the CEOs of Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara Indonesia (BNI) in a closed-door meeting, demanding evidence that the loan channeling was above board.
Mandiri, BRI and BNI secured $1 billion each from the China Development Bank (CDB) to finance infrastructure development in Indonesia.
The loan agreement was signed in Beijing in September by the president directors of the three banks and CDB vice chairman Zheng Zhijie, witnessed by State-Owned Enterprises Minister Rini Soemarno and Chinese National Development and Reform Committee chairman Xu Shaoshi.
But legislators started to question the loans late last year, with House Commission XI overseeing financial affairs and Commission VI overseeing state companies spearheading the probe. Lawmakers have suggested that the loans would benefit certain “free riders”, as they were not only earmarked to finance infrastructure construction but also other unrelated projects.
As the loans were not included in the banks’ initial annual business plans, the lawmakers also suspected the government might have forced the banks into accepting the loans.
Newly appointed Commission IV chairman Teguh Juwarno said lawmakers had suspicions that the loans were obtained to benefit certain parties. “We want to ensure that the banks were not pressured into receiving these loans for political reasons. It is a fact that the banks don’t need them,” said Teguh.
“There have also been reports that the debtors for the loans have already been determined. These are our suspicions,” he said after the hearing.
Teguh added that lawmakers also questioned the use of the loans, which were initially allocated to fund infrastructure projects. However, he said, the lenders had revealed that the loans were flexible, and would also be distributed to fund non-infrastructure projects.
The loans are part of President Joko “Jokowi” Widodo’s attempts to convince China to participate more in Indonesia’s development and match the contributions of other major powers that already have a strong foothold in Indonesia.
China’s investment in Indonesia remains far behind that of other partners, and the country only recently made it onto the list of Indonesia’s top 10 investors.
Business-wise, the CDB loans are fairly competitive, with an interest rate of 3.4 percent annually under a 10-year tenor with a three-year grace period.
During the hearing, the banks acknowledged they would not use the loans entirely for infrastructure. Mandiri will use 63 percent of its loan for infrastructure, BRI 87 percent and BNI 55 percent.
The banks will use the remainder of the funds to finance industry development, without specifically mentioning the sectors.
Commission VI deputy chairman Farid Alfauzi said the point of contention revolved around the use of the loans for other sectors, which went against the initial goal when the loans were first requested.
“We need to know who the debtors are and why they will receive loans. Because firms with no infrastructure projects could also receive them,” Farid said.
Lawmakers have yet to draw any conclusions from the hearings, and will schedule another meeting with the lenders next week to request detailed data on the debtors.
Mandiri president director Kartika “Tiko” Wirjoatmodjo said the lenders had explained that the funds were pooled as opposed to channeled to chosen debtors.
Tiko also argued that although the banks did not need the CDB loans at present, they would need such funding in the future to finance the many upcoming infrastructure projects.
Thus, he said, the loans were an initial step to understand the work pattern of CDB for another round of cooperation in the future. “The CDB does not dictate us, and is flexible with the use of the loans,” Tiko told The Jakarta Post, on Monday.
BNI president director Achmad Baiquni, who attended the meeting, declined to reveal details of the discussion, as the hearing would continue next week. Baiquni said BNI would provide the requested data to the House at the next meeting. “The lawmakers wanted to know the details of the debtors and whether or not the loans have been distributed,” he said.
The hearing into the Chinese loans picked up pace after the House’s special committee of inquiry into alleged corruption at PT Pelindo II recommended the dismissal of Rini on the basis of her responsibility for suspected fraud plaguing the state seaport operator.
