Thursday, April 26, 2007

Singapore Relents To Sign Extradition Treaty

This article was first published in Singapore Angle.

Singapore has finally relented and agreed to an Extradition Treaty with Indonesia (CNA, 23 Apr 07). Indon politicians had accused Singapore of dragging its feet on the treaty because the country was harboring Indonesian fugitives of the Suharto era convicted of embezzlement. Any delays on the part of the PAP government was probably not to protect the freedom of any criminals, but more likely to be satisfied that any potential flight of capital out of Singapore due to an extradition treaty would not seriously impact the country’s economy.

So how much money would create such angst in the Yudhoyono government and cause the PAP government to risk bilateral ties? A look at the top 7 most wanted Indonesian white collar criminals that are currently on the run might provide some indication:

  • Eddy Tanzil: Sentenced to 20 yrs. Embezzled $620 million from state-owned Bank Bapindo. Escaped and is now believed to be living in China.
  • Bambang Sutrisno: Former VP of defunct Bank Surya. Sentenced to life for embezzling Rp1.5 trillion. Now apparently living in Singapore.
  • Andrian Kiki Ariawan: Former president director of defunct Bank Surya. Sentenced to life for embezzling Rp1.5 trillion. Now apparently living in Singapore .
  • Samadikun Hartono: Former president director of defunct Bank Modern. Sentenced to 4 yrs for embezzling Rp169 billion. Whereabouts unknown.
  • Sudjiono Timan: Former president director of state-owned investment company PT Bahana Pembinaan Usaha Indonesia. Sentenced to 15 years jail for embezzling Rp1.1 trillion. Believed to be in Singapore.
  • Maria Pauline Lumowa: Boss of PT Gramarindo Mega Indonesia. Suspected of embezzling Rp1.7 trillion from state-owned Bank Negara Indonesia. Fled to Singapore before trial.
  • Irawan Salim: Former president director of Bank Global, suspected of embezzling Rp830 billion. Rumored to have fled to Singapore, Canada or Europe.

Source: Paras Indonesia

For a country that has been ravaged by corruption for so long, who knows how much of Indonesian money that has flowed into Singapore is potentially tainted. With an extradition treaty in place, how much of that money will stay around and risk being frozen as corruption investigations in Indonesia widen? It is also not difficult to see why Singapore was wary of the potential economic fallout if Indonesian money starts to leave Singapore:

  • Foreigners' share of total caveats lodged for private properties in Singapore in 2006 increased to 23%. Indonesians accounted for the lion's share of 22% of foreign buyers. (BT, 21 Mar 2007)
  • A third of Singapore's 55,000 high net worth individuals are Indonesians holding PR status, with assets worth $87b. (Merrill Lynch and Capgemini, October 2006)

Not only are trillions of rupiah involved (1trillion Rp is about S$170m), Indon President Yudhoyono’s political survival depends heavily on his ability to tackle corruption in Indonesia. Failure in pursuing these fugitives in an acceptable manner would seriously threaten his presidency.

Moral and ethical assertions aside, when would it be not in Singapore’s national interest to hold out on signing a treaty? Indonesia had probably realized this line of thought and had fired the first salvo in a game of quid pro quo by banning sand exports to Singapore and threatening to widen the ban to granite and wood. It seems Indonesia has played the right cards and has succeeded in getting the treaty she wants. Although how much the treaty is in Indonesian’s favour is still unknown as the terms of the treaty are yet to be made public. What is left is to see if Singapore has done its sums right and its economy can absorb outflows, if any, of Indonesian money.


A few readers in Singapore Angle saw my article as implicit support for harboring "dirty money". My reply:

I personally do not support harboring convicted white collar criminals. My intent was to discuss why, in my mind, PAP took so long to sign the treaty. Our relationship with Indonesia was never very good since Suharto's fall and the subsequent riots. One Indon president actually taunted us with the "little red dot in a sea of green" remark. It was only until the sand ban and its potential impact on PAP's plans for growth that it was forced to act. In addition to trying to gain something in return by throwing other issues onto the table (PAP is fond of what it calls a "win-win" agreement), I believe PAP had to also ensure due diligence by being certain IF and HOW MUCH dirty money is stashed in Singapore (not an easy task) and IF SO, would the key institutions involved be able to withstand any repercussions. I believe all these led to the delays.

In terms of risking the plans in being a financial hub in not addressing the accusations of harboring questionable money, we only need to look at Switzerland.

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