Cracks Appear in Indonesian Coalition over Bank Bailout

Indonesia’s parliament recommended a criminal probe of the country’s two top economic reformers late Wednesday over a controversial bank bailout that has revealed cracks in the ruling coalition. More than half of the country’s lawmakers voted for Vice President Boediono and Finance Minister Sri Mulyani Indrawati to be investigated for authorising the 724-million-dollar rescue package for Bank Century in 2008.

The move, which came in a televised vote supported by 325 lawmakers including members of coalition partners Golkar and the Muslim-based Prosperous Justice Party, will increase pressure on President Susilo Bambang Yudhoyono.

The lawmakers accused the pair of “abuse of power” in the bailout, which they say caused huge losses for the state. The most respected economic figures in Yudhoyono’s cabinet, Boediono and Sri Mulyani have been under intense pressure after the country’s top auditor last year found strong indications of “violations” in the bailout.

The parliamentary debate this week over the issue has been matched by street protests in several cities. Demonstrators in Jakarta on Wednesday hurled bamboo sticks at police outside parliament and students in the South Sulawesi city of Makassar damaged vehicles and blocked main roads, causing massive traffic jams.

The controversy has put Yudhoyono in a difficult position, forcing him to decide between keeping his two colleagues or preventing his coalition from disintegrating, analysts said. “SBY needs solid political support as he still has four years ahead to rule the country,” Bantarto Bantoro from the Centre for Strategic and International Studies (CSIS) said, referring to Yudhoyono by his nickname.

Analysts said it was unlikely Yudhoyono would either allow the investigation to take place or suspend the pair, despite parliamentary pressure. “The president can’t be politically forced to suspend the two figures if there’s no legal proof that they had broken laws or misused funds,” Standard Chartered Bank economist Fauzi Ichsan told AFP.

“The country’s economy will suffer without them. These two reformers are highly respected by the domestic and international market,” he added. At the height of the global economic crisis in late 2008, Yudhoyono’s government said the bailout was necessary to prevent a “systemic economic meltdown”.

The president will have to decide if it is best for the parties to stay together or go their separate ways, analyst Pande Raja Silalahi said. Yudhoyono, a liberal ex-general, defended his colleagues on Monday, saying he accepted responsibility for a decision he described as necessary to save the country’s banking sector.

Yudhoyono was re-elected in 2009 on the back of promises to root out corruption, which riddles every aspect of Indonesian public life from the courts to the customs office.