Sand in Singapore’s gears

Asia Sentinel
05 March 07

Indonesia, seeking legal recourse to nab fleeing financiers, uses the world’s cheapest commodity as a weapon

It started with a barge-load of Indonesian sand, or a whole fleet of them, delayed for the last two months on their way to Singapore to be used in reclamation projects.

At first Indonesian officials insisted the sand without a country was held up for environmental reasons. Now, it appears the sand is actually political leverage in an extradition tiff with Singapore over a brace of crooked bankers hiding out in the city state.

What’s really at stake is not sand, which should be the world’s cheapest commodity, but an extradition treaty that Singapore government authorities have been refusing to sign for 34 years. Indonesia wants a bunch of elusive bankers who took part in an astounding heist of more than US$13.5 billion looted from the Indonesian central bank’s recapitalization lifeline to 48 ailing banks during the 1997-1998 Asian financial crisis.

The matter is an embarrassment to Singapore to say the least. It is safe to say that no country in Asia is more jealous of its reputation for incorruptibility, grimly built and guarded by its 83-year-old founder and “minister mentor,” Lee Kuan Yew over more than five decades.

Despite that, the city-state has always been a bolt-hole for Indonesian tycoons a step ahead of the law or sporadic ethnic violence. According to Tempo Magazine, there are some 18,000 Indonesians described as “rich” living in Singapore worth a combined total of US$87 billion – more than Indonesia’s entire annual government budget. Yunus Husein, Chairman of the Financial Transactions Report & Analysis Center in Jakarta, told Tempo that the Indonesian embassy in Singapore had confirmed that some 200 debtors who owe money to the state had been hiding there since 1998.

The Singapore embassy in Jakarta declined comment other than to tell Asia Sentinel questions over the matter had already been referred to authorities in the city state. On Feb. 19, Singapore’s Ministry of Foreign Affairs issued a statement saying that the two countries are making progress in negotiations over the treaty “in good faith on the basis of mutual benefit.” The treaty, the ministry said, is linked to negotiations over a mutual defense agreement.

“Unilaterally making sand an additional issue with the objective of delinking the defense cooperation agreement from the extradition treaty contravenes the earlier agreement by the two leaders,” the ministry statement said. “As for the linkage to border delineation, Minister for Foreign Affairs George Yeo said in Parliament recently that ‘the talks are complicated enough without this additional complication.'”

Sand – Indonesian sand – is crucial for Singapore. In 1960, the entire island state was only 581.5 square kilometers. It has since grown to some 650 sq km and expects to grow by another 100 sq km by 2030 – if it can find the firmament.

But the prevailing view in Jakarta is that Singapore isn’t going to get any more sand until officials sign the papers that would cause it to cease harboring what are alleged to be Indonesian criminals and their ill-gotten gains.

Instead of recapitalizing their banks, many bankers simply skipped and parked their funds in Singapore, which welcomed the deposits, unaware that times were about to change in Indonesia after the 1998 demise of former President Suharto.

While the process of Indonesian democratization and fighting corruption has been slow at best, in this case a Supreme Audit Agency report commissioned by the House of Representatives, the Indonesian parliament, revealed that a massive Rp138 trillion of missing funds had been channeled by improper procedures and then misused by the recipient banks, mostly owned by Suharto’s cronies and relatives. Instead of managing the funds to guarantee depositors’ savings, the errant bankers used much of the money for currency speculation, loans to affiliated business groups and repayment of subordinated loans and securities transactions.

Indonesia is a place, however, where most things can be negotiated and since the errant bankers weren’t remanded to custody, by the time the courts had handed down final verdicts, they had absconded. Another common tactic was to plead illness. Instead of insisting on speedy prosecutions, complicit Indonesian officials continued to grant court delays and issue permits for medical treatments abroad.

Prosecutors could do little, if anything, to prevent flight as only the courts have the power to order detention during the trial process.

As recently as last June, travel bans were slapped on eight former owners of banks for failing to repay the money. The eight are Marimutu Sinivasan, Ulung Bursa, Atang Latief, Lidia Muchtar, Omar Putiray, Adisaputra, James Januardi and Agus Anwar, who are estimated have a combined principal debt of Rp3.02 trillion.

Still on the lam, among many others, are: Sjamsul Nursalim, former president commissioner of Bank BDNI, who reportedly lives in Singapore. Bank BDNI was the second-largest recipient of funds after Bank Central Asia, a Rp37 trillion gift from the government.

Samadikun Hartono, former president director of the now-closed Bank Modern, was found guilty of embezzling Rp169 billion and sentenced to four years in jail; there have been no public reports of his whereabouts.

Bambang Sutrisno and Andrian Kiki Ariawan are also fugitives – they were vice president and president director, respectively, of the closed Bank Surya. Both were accused of embezzling Rp1.5 trillion and sentenced to life imprisonment. Both reportedly live in Singapore.

Sudjiono Timan, former president director of state-owned venture-capital investment company PT Bahana Pembinaan Usaha Indonesia, disappeared when prosecutors tried to arrest him at his home after he was sentenced to 15 years in jail. He was involved in an Rp1.1 trillion corruption case involving the channeling of state funds to Suharto’s cronies. He is also thought to be in Singapore.

Set up in 1993 to facilitate national development and cooperation with foreign investors, Bahana Pembinaan Usaha Indonesia ended up with debts of almost $1 billion and was owed hundreds of millions in outstanding loans by corruption-linked tycoons.

Others include Lidia Mochtar, suspected of embezzling the equivalent of US$S20 million from Bank Tamara; Agus Anwar, a suspect over US$214 million missing from Bank Pelita; and Maria Pauline Lumowa, who headed PT Gramarindo Mega Indonesia and is suspected of masterminding the embezzlement of Rp1.7 trillion from state-owned Bank Negara Indonesia through allegedly fictitious letters of credit. She fled to Singapore before trial.

In October 2006 Tempo magazine reported that several had moved their head offices to Singapore, including Sukanto, boss of the Raja Garuda Mas Group, which had problem loans amounting to US$1.4 billion (Rp13 trillion) owed to several national private banks. Asia Pacific Resources International Holdings Ltd, one of Sukanto’s business units, controls paper and pulp businesses in China, Indonesia, Hong Kong, Brazil and Finland.

Tempo noted comments by Andy Xie, then senior economist of Morgan Stanley Asia, that “Much of the success of Singapore is due to it becoming a money laundering center for corrupt business people and officials from Singapore.” Xie was almost immediately cashiered by Morgan Stanley for this and other related comments.

See other reports of money-laundering in Singapore:

Morgan Stanley’s chief asian economist’s comments on dirty money in Singapore:

Corrupt Thaksin’s money and Singapore:

Burma’s drug money laundered in Singapore: