Shifting sands to prod ‘Safe Haven’ Singapore

Rudy Parawisto
02 Apr 07

Sand has become the latest weapon in Indonesia’s diplomatic row with neighbouring Singapore, over the latter’s refusal to sign an extradition treaty that seeks to have corrupt Indonesian businessmen returned from their safe haven in the tiny island republic.

Against studies showing the number of millionaires in Singapore increasing faster than any other country came the sobering report in October 2006 by the financial analyst firm of Merrill Lynch indicating that about one-third of Singapore’s 55,000 millionaires were actually Indonesians.

The report by the United States-based firm revealed that roughly 18,000 people of Indonesian origin, resident in Singapore, held financial assets worth 87 billion US dollars.

This has fuelled a view here that Indonesia’s rich and corrupt have parked their ill-gotten money in Singapore banks and taken up permanent residence among the city-state’s four million inhabitants to evade being nabbed by Indonesia’s anti-corruption drive.

”We know that so many corrupt businessmen and criminals have gone to Singapore to seek protection. We can’t do anything because they are there and since we don’t have a treaty we can’t ask Singapore to send them back,” Bantarto Bandoro, international affairs analyst at the Centre for Strategic and International Studies, told IPS.

‘’For Indonesia a treaty is important, but not for Singapore, because they could lose certain things. But, we want Singapore to understand this issue needs to be solved if we want to preserve our diplomatic relationship,” he added.

Teten Masduki, the coordinator of Indonesian Corrupt Watch (ICW), says he suspected that a large part of the 506.8 trillion Rupiah (87 billion US dollars) in funds parked in Singapore by Indonesians is owned by former embezzlers of state and private banks.

Singapore’s foreign minister George Yeo has said that linking the sand ban to Singapore’s refusal to sign an extradition treaty could prove counter-productive. “What is needed is political goodwill on both sides to finalise the agreements, which from Singapore’s perspective is within reach,” he said in a statement.

“The treaty is imperative for Indonesia, both in its war against corruption and in an effort to regain funds stashed off-shore by crooked business tycoons and senior (former) government officials,” argues Ardimas Sasdi, a communications management lecturer at Jakarta’s Gadjag Mada University. “Many of them live peacefully with their families in luxurious houses and apartments in Singapore, beyond the reach of the Indonesian justice system … and continue to run businesses (in Indonesia) from Singapore).”

Singapore has aggressively promoted itself as a regional financial centre, which maintains strict banking secrecy laws, thus attracting funds from rich people not only from Indonesia but also China and Russia.

While Singapore officials have been at pains to explain that they have safeguards in place to prevent the island state from becoming a money-laundering centre, critics say Singapore’s refusal to sign an extradition treaty with Indonesia, which specifies economic crimes as grounds for extradition, shows its reluctance to impose checks on the source of funds attracted to its banking sector.

Australia’s ‘Age’ newspaper reported recently, quoting senior fund managers based in Singapore, that the island state has become a global centre for parking ill-gotten money with no questions asked. They have pointed out that such funds flocking to Singapore helped to increase high-end property values by 30-50 percent last year.

Sasdi argues that if Singapore signs an extradition treaty with Indonesia – negotiations for which have been going on for a decade – it could severely affect its economy. Thus, to cover up this fact it plays a game of “aid diplomacy” and helps out every time Indonesia face a natural disaster like the tsunami or an earthquake. ‘’This creates an image of Singapore as a good neighbour.”

But Sasdi thinks it is more important for Singapore to look at the other side of the coin and understand that Indonesia needs Singapore’s assistance in fighting rampant corruption. “Indonesia’s economy is in shambles because of the defaulted debts of these tycoons (who have taken their money to Singapore),” he points out.

After signing an extradition treaty with Indonesia in 2004, Australia had frozen the funds and later returned to Indonesia almost 300 million US dollars embezzled by fugitive Indonesian banker Hendra Rahardja, who died in Sydney of cancer while legal proceedings were taking place.

But, law lecturer Huala Adolf from University of Padjajaran in Bandung argues that the root of the problem is not Singapore’s position, but, corruption of Indonesian officials and law enforcement agencies. “The root of the problem lies at home. We should ask why the assets were taken out of Indonesia so easily, why official corruption is so rampant and why enforcement is so weak,” he said writing in the ‘Jakarta Post.’

This issue is surfacing over the enforcement of Indonesia’s sand export ban. Most of the sand for Singapore’s construction boom has come from islands in the Riau province of Indonesia. Many of these islands are between half-an-hour to one-hour by ferry from Singapore.

The sand export ban has severely affected Singapore’s construction boom where several huge projects including two multi-million dollar casinos are being built. The price of sand in Singapore has increased eight-fold since the export ban was imposed by Indonesia on Jan. 23.

Indonesia is believed to have sold each cu. metre of sand at 67 cents to brokers who in turn sold the same for 13 dollars per cu. metre in Singapore. The price has now shot up to 32 dollars a cu. metre, and sand smugglers are believed to be able to suck up as much as 10,000 cu. metres in any given night from islands close to Singapore – allegedly protected by corrupt officials in the Indonesian navy, police and customs.

For years, there have been massive discrepancies in Singaporean and Indonesian trade figures on sand exports. In 2001, for example, official data in Jakarta showed that Indonesia exported some 75 million cu. metres of sand to Singapore, while the latter’s import figures show 300 million cu. metres imported from Indonesia. While Singapore says it spends as much as 160 million dollars a year on Indonesian sand, in 2005, Indonesia’s Central Statistics Agency reported a mere six million dollars worth of sand exports to Singapore.

Thus it is believed that significant illegal sand exports have taken place with no benefit to Indonesia. In addition to environmental concerns, some nationalist legislators have argued, that, with some islands about to be submerged by sea waters due to excessive sand mining, Indonesia’s maritime boundaries could be affected to Singapore’s benefit.

Indonesia’s maritime affairs minister Freddy Numberi argues that sand exports and Indonesia’s territorial and political disputes with Singapore are interrelated. “Politically, we banned the export of sand because we wanted it to have a larger economic value, and we also wanted to settle our border disputes with Singapore,” he said.

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