PNG's Nationwide Microbank Signs Up 100,000th Customer

Asian Development Bank, 31 May 2011

MANILA, PHILIPPINES - Papua New Guinea's (PNG) Nationwide Microbank has signed up its 100,000th customer, highlighting the ongoing demand for quality and accessible banking services in the country.

The landmark bank account was opened by Tommie Seriate, a 49-year-old widow and mother of four from the Unggai Bena District of the Eastern Highlands Province.

"I am so happy and glad that I made the right decision to open an account with Nationwide Microbank," said Ms Seriate. "They made it so simple to open a savings account."

To make a living, Ms Seriate operates a small coffee garden in a remote part of the Eastern Highlands Province, some two hours by road north of Goroka, the provincial capital. She had previously tried to open a bank account with two commercial banks without success.

Nationwide Microbank (formerly Wau Microbank) was established in 2004 as a pilot scheme under the ADB Microfinance and Employment Project. The project was implemented between 2002 and 2010 with a $9.6 million concessional loan from ADB to the Government of PNG and a grant from the Australian Agency for International Development (AusAID). It laid the foundation of a growing microfinance sector in PNG, through extensive training of staff and the development of appropriate products.

"Giving individuals and small firms access to the finance and banking services they need encourages entrepreneurship which ultimately helps boost economic growth for the country as a whole," said Eugenue Zhukov, Regional Director of ADB's office in Australia.

Although no official data exists, ADB estimates that only 15% of the PNG population has access to formal or informal banking facilities, lower still in rural parts of the country. This means that small firms are unable to get the finance they need to expand and individuals are unable to either borrow to meet their financial needs or securely save their earnings.

"Nationwide Microbank continues its efforts to ensure that the people of Papua New Guinea have access to relevant and affordable financial services," said Tony Westaway, Nationwide Microbank's Managing Director. "We are ‘banking the un-banked', an achievement that would not have been possible without the ongoing support from the Asian Development Bank and the Pacific Financial Inclusion Programme (PFIP)."

In order to further expand its reach into rural areas and make its services even more accessible to clients, Nationwide Microbank is developing a "branchless" banking strategy, with support from PFIP and ADB, which will offer financial services through the use of mobile phones and other wireless technology. The aim is to enable clients to use their bank accounts without needing to travel to a bank branch, a journey that can be both costly and time-consuming from remote parts of the country.

PFIP is a Pacific-wide program that is helping to provide sustainable financial services to low income households. It is funded by the UN Capital Development Fund, AusAID, the European Union, and the United Nations Development Programme (UNDP). PFIP operates from the UNDP Pacific Centre in Fiji.

About ADB

After 5 Years, Sidoarjo Mud Victims Blast Lag in Payouts

Jakarta Globe, Amir Tejo | May 30, 2011

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Sidoarjo, East Java. Five years since a torrent of hot mud engulfed thousands of homes in Sidoarjo, East Java, villagers are still waiting for the damage payments promised to them.

“This is unacceptable,” said Abdul Fatah, the owner of a school destroyed by the mud and one of hundreds of residents who gathered in Porong subdistrict on Sunday to mark the anniversary of the May 2006 disaster.

“This mudflow has been going on for five years now, but our claims remain unpaid,” he said.

Fatah said Lapindo Brantas — the Bakrie Group subsidiary blamed for the gush that followed the blowout of one of its natural gas wells — had only paid him Rp 400 million ($47,000) of his Rp 1.5 billion payout.

He said the company had violated the law by delaying the payments to him and around 11,000 families entitled to property-damage compensation.

“Under a presidential decree, we were supposed to receive the money in two stages — first 20 percent, then 80 percent,” he said. “That 80 percent was supposed to be paid in cash up front, not in installments.”

“By allowing Lapindo to [pay in installments], the state is breaking the very law that it set down,” Fatah added.

Every month Lapindo failed to follow through on its promise, he said, hope faded for his dream to build a new Islamic school.

Saman, a resident of Jatirejo village, said the trickling monthly payments were delayed.

He said payouts had stopped coming in the four months since January and only resumed earlier this month.

Saman said he had joined members of the Sidoarjo district legislature in pushing the central government to provide a loan to Lapindo so that it could complete its payments, but the state did not respond to the demand.

Diaz Raichan, a spokesman for Lapindo, has assured residents the compensation process was still ongoing.

“We expect to pay them off in full by the middle of 2012,” he said last week.

The mudflow has destroyed hundreds of homes, swamped 720 hectares of land and displaced thousands of people since it began erupting just 200 meters from the mouth of the ruptured Lapindo gas well.

While most scientists agree the disaster was caused by an explosion at the well, Lapindo and the government have laid the blame on an earthquake that struck days before the mudflow, about 280 kilometers away. This theory has been dismissed for lack of evidence by many experts studying the mud volcano.

Shortly after the disaster, President Susilo Bambang Yudhoyono ordered the company to pay about $400 million for mud containment efforts and compensation to those affected.

Lapindo is partly owned by the family of Golkar Party chairman Aburizal Bakrie, who at the time of the eruption was the coordinating minister for the people’s welfare.

On Sunday’s anniversary, residents held a mass prayer and hung banners calling for full compensation to be paid immediately by Lapindo.

They also called for the government and Lapindo to compensate around 45 families whose homes were destroyed by the mudflow but who were not officially recognized as living in the disaster zone.

Related Article:

Lapindo Told to Shell Out For Mudflow Before Drilling Again

Indonesia ex-treasurer Muhammad Nazaruddin 'flees'

BBC News, 27 May 2011

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A senior figure in Indonesia's governing party has flown to Singapore a day before he was due to receive a travel ban for suspected corruption.

President Susilo Bambang Yudhoyono has promised
to clamp down on corruption in Indonesia

The ex-treasurer of the governing Democratic party, Muhammed Nazaruddin, is accused of accepting bribes worth almost $3m (£1.8m).

The case centres on tenders for the South East Asian games, to be hosted by Indonesia later this year.

Mr Nazaruddin has always denied the corruption allegations.

Mr Nazaruddin was dismissed by the party last week, and Indonesia's anti-corruption agency announced that it would be questioning him about the allegations.

However, Mr Nazaruddin flew to neighbouring Singapore on Monday, a day before the agency was to issue a travel ban for him.

Mr Nazaruddin had threatened to disclose details about other party members' misdeeds, in retaliation for his dismissal as party treasurer, says the BBC's Karishma Vaswani in Jakarta.

His quick departure has raised questions about why it was so easy for him to leave, given the gravity of the allegations against him, our correspondent says.

However, Mr Nazaruddin told the Jakarta Globe that he had travelled to Singapore for a medical check-up and would return to face Indonesia's Corruption Eradication Commission (KPK) as soon as his results were available.

"What did I do wrong? I have never been summoned by the KPK. If they call me I will come," he said, adding that he had sought permission from his party before he left the country.

President Susilo Bambang Yudhoyono has always tried to project an image of himself as the "Mr Clean" of Indonesian politics - one of the reasons it is believed Indonesians voted his party in for a second term in 2009.

He is hoping that his new economic agenda will spur more foreign investment in Indonesia - but these sorts of corruption scandals suggest that he still has a lot to do to prove he can change his country's culture of impunity, our correspondent adds.

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Indonesia Best Country to Start Business: BBC

Jakarta Globe, May 26, 2011

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Indonesia has been listed as the top country for entrepreneurs to start a business, ahead of the United States, Canada, India and Australia, according to a survey commissioned by the BBC.

The results are based on 24,000 interviews conducted by international survey firm Globescan across 24 different countries — where respondents were asked whether innovation and entrepreneurial was highly valued in their country and how easy it was to start a business.

According to the BBC, developed countries fared well in the survey with the exception of Italy, which appeared alongside Colombia, Egypt Turkey and Russia as being the least conducive environments for starting a business.

Along with Indonesia, developing countries India, China and Nigeria were also seen as favorable places for entrepreneurs.

While most of the results paralleled global perceptions of countries that fostered new businesses, there were a couple of anomalies. For example, Nigeria rated well despite high levels of corruption.

Ministry, KPK sign MoU on corruption prevention

The Jakarta Post, Jakarta | Thu, 05/26/2011

The State-Owned Enterprises Ministry and Corruption Eradication Commission (KPK) on Thursday signed a memorandum of understanding in efforts to prevent corruption in state-owned enterprises.

The MoU was signed by SOE Minister Mustafa Abubakar and KPK chairman Busyro Muqaddas, a press statement from the ministry says.

The agreement covers five areas: data access, wealth reports, gratification controls, state asset management, and anti corruption initiative evaluation and research.

The ministry also announced that as of May 20, only 30 out of the 1,189 state-owned enterprise directors and commissioners had submitted wealth reports.

Gratification controls have also been added as a parameter to measure good corporate governance in the state-owned enterprises, the statement says.

RI hopes to be high income country in 2025

Antara News, Thu, May 26 2011

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Jakarta (ANTARA News) - The government expects Indonesia to become one of high income countries in 2025 by developing its potentials particularly in the economic sector.

In its written statement issued on Wednesday, the Coordinating Ministry of Economic Affairs said Indonesia is listed as the world`s 17th biggest economy, with per capita income reaching around US$3,000 in 2010.

If every thing goes on as planned, Indonesia will belong to a group of high income countries in 2025, the statement said.

Indonesia is rich in a variety of resources which can be turned into the main engine of the national economy, it said.

The statement said Indonesia is in the process of transforming itself from factor-driven economy to efficiency-driven economy.

However, Indonesia`s dream of being one of the world powers will not come true if a wide range of challenges remain unsolved. Among the challenges are a lack of infrastructures, low quality human resources, urbanization and the impact of climate change, it said.

Therefore, in-depth planning is badly needed to benefit from the momentum of joining the world`s emerging market countries, it said.

For its part, the government has drawn up a blue print for accelerated economic transformation which must be supported by a number of breakthroughs in formulating short-, medium-and long-term strategies and policies.

The planning is put in the master plan for acceleration and expansion of Indonesian economic development (MP3EI) covering 22 main economic activities in the country, the statement said.

President Susilo Bambang Yudhoyono is set to launch MP3EI at the Jakarta Convention Center on Friday (May 27). As a follow up to the launch of MP3EI, the government will set up a team to be led by the President to implement it.

During the launch of MP3EI, the President will hold a teleconference with the governors of North Sumatra, West Java, East Nusa Tenggara and Papua provinces.

Editor: Aditia Maruli

Is Indonesia the next Brazil?

Moneycontrol.com, Tue, May 24, 2011

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• UPDATE 1-Indonesia expects lower budget deficit in 2012
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Indonesia's low debt levels and strong growth potential has made the country a choice destination for investors, prompting financial firms like Deutsche Bank to compare the economy to Brazil's in the 1990s.

"Indonesia's potential, if realized, could deliver Brazil-type returns for years to come," according to Deutsche's report released last week.

Indonesia has enjoyed an average growth rate of 5.7% between 2006 and 2010, and that figure is expected to stay around 6% this year. The growth trajectory has resembled that of Brazil's in the 1990s, Deutsche noted.

Already boasting among the lowest budget deficits in Southeast Asia, Indonesia is hoping to reduce it further in 2012 -- to 1.4-1.6% of GDP from the current 2% -- as it seeks to win approvals from rating agencies.

In February, Indonesia moved one step closer to an investment grade rating for the first time since the Asian financial crisis, when Fitch Ratings agency raised its outlook on the country's sovereign debt to positive from stable. Both Fitch and Moody's ratings on Indonesia currently stand at just one notch below investment grade.

Apart from the low debt levels, Deutsche also lauded the country's consumption power. With 232 million people, Indonesia is home to the world's world`s fourth largest population and the biggest in Southeast Asia.

"This is a population that wants to consume," said Tony Nash, Global Director of Custom Research at the Economist Intelligence Unit (EIU). He says consumption in the country has risen 4-and-a-half times in the last 10 years, with sales of cars rising 57% in 2010, and motorbikes up 26%.

And the consumption trend is likely to continue for awhile, according to Deutsche's report.

"The absolute size of (its) working age population will continue rising for at least another 15 years," the bank observed, which will in turn improve Indonesia`s productive and income generating capacity.

Since the Asian financial crisis in 1999, Indonesia has worked to restore macroeconomic stability. It has sufficient reserves cover; a low external debt exposure at 27% of GDP; and a public debt that is below 30% of GDP, among the lowest in the emerging markets.

Couple that with vast natural resource base it boasts, including iron ore and soybeans - it's perhaps easy to see why investors have been drawn to this market. Foreign direct investment was up over 30% last year, while the Indonesian equity market has been the best performing Asian market so far this year.

Deutsche cites the country's progress over the past decade in deepening roots with civil society and democratic institutions as a factor aiding investor sentiment.

But more needs to be done if it is to continue attracting investors.

"Inflexible labor markets are a big, big issue for foreign investors," EIU's Nash pointed out.

Corruption, infrastructure bottlenecks and uncompetitive regulation are also issues that have continued to plague Indonesia.

"The key next step for Indonesia is institution building, and regulatory predictability," Nash concluded.

Source: CNBC.com

VP calls for application of int`l accounting standards

Antara News, Mon, May 23 2011

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Denpasar, Bali (ANTARA News) - Vice President Boediono in his address opening the fifth International Financial Reporting Standards (IFRS) Regional Policy Forum here on Monday, called for the implementation of international accounting standards in Indonesia.

Vice President Boediono.
(ANTARA/Widodo S. Jusuf)

The vice president said the standards were expected to support the improvement of the quality and transparency of companies`s financial reports in Indonesia.

"Uniting Indonesian and international accounting standards is not easy. Adherence to IFRS is not only an accounting issue because it is also intended to improve the quality and transparency of financial reports of companies in Indonesia," the vice president said.

Boediono said policy makers` support for the application of IFRS accounting standards was needed.

Therefore he appreciated the support from policy makers such as Capital Market Supervisory Board, Bank Indonesia, and State Ministry for State Enterprises which required the use of accounting standards from IFRS.

Managing board chairman of the Indonesian Accountants Association Mardiasmo said that some 300 delegates came from Asia, Oceania and other countries, including China, South Korea, Brunei, Japan, Malaysia, Macau, Hong Kong, Nyanmar, New Zealand, Philippines, Singapore, the US and the UK.

Mardiasmo said it was time for Indonesia to play an important role in discussions on accountancy standards in facing global challenges and opportunities.

The Vice President who arrived at Ngurah Rai airport here from Bandung at 10.15 am flew back to Jakarta after opening the event.

He was greeted by Bali Governor Made Mangku Prastika, the local legislative assembly speaker and members the Bali Regional Board Coordinating Forum.

The Vice President went to the IFRS forum and greeted by Mardiasmo and representative of IFRS Foundation Jeffrey Lucy.

Deputy Finance Minister Ani Ratnawati was also present on the occasion.

The Vice President was slated to fly back to Jakarta at 12.25 pm and arrive there at 1.10 pm.

Editor: Priyambodo RH

FM pleased RI elected to UN Rights Council

Antara News, Sat, May 21 2011

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Jakarta (ANTARA News) - Foreign Affairs Minister Marty Natalegawa said he was pleased that Indonesia has been elected as a member of the UN Human Rights Council for the period 2011-2014.

"The fact that Indonesia was elected with the biggest number of votes from UN members (184 out of the 191 votes cast) is an indication of the international world`s acknowledgment of our efforts to promote human rights protection both in the region or in international forums," the minister said here on Saturday.

Marty also said membership in UN Human Rights Council was a chance for Indonesia to play a more active role in promoting human rights protection in the world.

Indonesia had been a member of the UN Human Rights Council twice in the past, namely in the periods 2006-2007 and 2007-2010.

Last April 6, a representative from Indonesia read out the government`s voluntary pledges and commitments if the country was accepted as a UN Human Rights Council member for the period 2011-2014.

In its pledges Indonesia would continue to strengthen its human rights observance mechanisms at national, provincial, district and municipal levels while also improving the level of coordination among government authorities in the spirit of strengthening human rights enforcement.

Indonesia also promised to continue to strengthen the work of the ASEAN Intergovernmental Commission on Human Rights for the promotion and protection of human rights in the region and continue to work and fully cooperate with United Nations human rights mechanisms.

Up till now, the council has 46 members, namely Angola, Argentina, Bahrain, Bangladesh, Belgium, Brazil, Burkina Faso, Cameroon, Chile, China, Cuba, Djibouti, Ecuador, France, Gabon, Ghana, Guatemala, Hungary, Japan, Jordan, Kyrgyzstan, Malaysia, Maldives, Mauritania, Mauritius, Mexico, Nigeria, Norway and Pakistan.

Other members are Poland, Qatar, Republic of Korea, Republic of Moldova, Russian Federation, Saudi Arabia, Senegal, Slovakia, Spain, Switzerland, Thailand, Uganda, Ukraine, United Kingdom, Uruguay and Zambia.

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Lapindo Told to Shell Out For Mudflow Before Drilling Again

Jakarta Globe, Amir Tejo, May 21, 2011

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Surabaya. East Java Governor Soekarwo said on Friday that Lapindo Brantas, blamed for triggering a devastating mudflow in Sidoarjo, could only resume drilling operations there if it paid outstanding damages to residents.

“There are some overdue payments and this has to be paid if they want to drill again. This is in line with a sense of justice,” Soekarwo said.

He said the oil and gas drilling firm, which is part of the Bakrie Group, still owed victims of the 2006 disaster Rp 452 billion ($52.9 million) in compensation after the May 15 deadline set by the company to settle all payments lapsed.

Though the government had set a later deadline — by the end of 2012 — for indemnities, Soekarwo said the company should “accelerate the payments.”

“And even then, it would still depend on whether the local community would allow them [to drill for oil and gas],” he said.

But company spokesman Diaz Raichan said the drilling project in Kalidawir village, Tanggulangin subdistrict — an area close to Porong subdistrict, where the mudflow occurred — had to push through.

“What is clear is that the city gas program should continue to run because this is a project of the central government,” he said.

The Ministry of Energy and Mineral Resources launched the gas program last year for Surabaya and surrounding areas.

Under the program, Lapindo will provide gas to the area from one of the its wells in Kalidawir.

“All will be taken from the Kalidawir well. We deem it enough to meet the gas demand for Surabaya,” Diaz said. “There are five wells in Kalidawir, although only two are in operation.”

Diaz added that only upstream oil and gas regulator BPMigas had the authority to allow or restrict the company from pushing through with the project.

He said BPMigas had issued a permit for drilling operations until 2020 in Sidoarjo, where Lapindo operates several wells.

However, officials in Tanggulangin had refused to approve the permit, saying the company had to consult with villagers first.

“The authority lays with BPMigas but we will continue to work together with the regional administration because the location [of the drilling project] is close to settlements,” Diaz said.

He added that the company would be able to complete payments this year to residents in 12 villages of Porong subdistrict, which had been swamped in mud following a blowout of one of Lapindo’s natural gas wells in May 2006. Mud is expected to continue gushing until at least 2037.

The company formed by the union of Bumi Resources and Berau
Coal Energy is looking to acquire coal mines around the world and
become a global giant, investor Nathaniel Rothschild, left, said on Friday.

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Indonesia's mud volcano flows on

Satellite picture received from Ikonos Satellite Image on May 29, 2008 shows the mud volcano and its surrounding area in Sidoarjo, East Java. (AFP/Ikonos Satellite Image)

More pictures ....

Respected Journalist Slaps Down Bakrie Award

Govt expects growth of up to 6.9% in 2012

Erwida Maulia, The Jakarta Post, Jakarta | Fri, 05/20/2011

The government is targeting economic growth of between 6.5 and 6.9 percent in 2012, the finance minister says.

Finance Minister Agus Martowardodjo submitted the target, along with other macroeconomic assumptions for the 2012 fiscal year, to members of the House of Representatives at a plenary session on Friday.

Once approved by the House, the assumptions will be used to compose a draft for the 2012 state budget.

Finance Minister Agus Martowardodjo said the government was optimistic with the target, as it was in line the "positive signals" of the global economy for the year 2012.

"Based on [the positive signals], the government is optimistic that [Indonesia’s] economy will continue to grow in 2012, by between 6.5 and 6.9 percent," Agus said.

He added that the government would work to stabilize inflation and the rupiah in efforts to support the realization of the growth target.

"The government will also enact a number of strategic policies in 2012, including improving the competence of domestic industries, strengthening partnership schemes for private investment funding, improving the international trade performance, strengthening public consumption, and improving the investment climate in both financial and real sectors."

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e-KTP system will attract political use, minister says

The Jakarta Post, Jakarta | Sun, 05/15/2011

Home Affairs Minister Gamawan Fauzi admits that the availability of electronic identification cards (e-KTP) will be taken advantage of by political, business and advertising interests alike.

“Yes, of course. They will take advantage of it,” he said Friday, as quoted by tempointeraktif.com.

In preparation of the e-KTP system, the ministry will create a database of citizen information such as addresses, family members, age, jobs and education. There will be a total of 27 data item stored in the database, which will maintain the most up-to-date information.

The data will be renewed when citizens go to record their fingerprints at the sub-district level, where citizens will be asked to re-check the accuracy of their data.

According to Gamawan, this data will potentially attract the interest of various parties.

For politicians the data would data would help them identify and locate potential voters.

"Even advertisers will take advantage of the data because he will then know where to advertise using this data,” Gamawan said.

However, Gamawan explained that it will not be easy to access the data, as it will only be accessible through official requests to the ministry.

"There has to be permission from the Home Affairs Minister," he said. "There is no chance the data will be accessed for advertising purposes."

Insight : Reforming wealth management (Part 1 of 2)

The Jakarta Post, Amol Titus, Sat, 05/14/2011

Wealth multiplication is an ingrained motive in the capitalist model which sits at the heart of modern financial markets. And acts of entrepreneurship which result in legitimate wealth multiplication are to be marveled as lessons in good management.

For example, take the profits e-Bay has made on Skype. Some time ago it sold a 70 percent stake in Skype for approximately US$2 billion and earlier this week it will make a similar amount for its balance 30 percent stake sale after it was announced that Microsoft is buying Skype for a whopping $8.5 billion as it tries to keep up with the mega trend of web and device based social connectivity.

Many other examples abound and several Indonesian businessmen have similarly multiplied their wealth through shrewd investment decisions and impressive risk taking over the past decade.

However, illegitimate wealth multiplication through money laundering, fraud, tax evasion and corruption is downright illegal and deserving of criminal prosecution as per regulations.

Like any other criminal activity those accessory to it are also liable for prosecution under the law, both local and international.

As the recent serious fallouts from bank scandals have highlighted there is a seamier side of wealth management that is tarnishing the discipline and reputation of the banking system.

Worse it is obstructing the efforts of anticorruption teams whose hands must be strengthened if a key emerging market like Indonesia is to graduate beyond short term hype as a resource rich play to long term progress as a better governed economy.

To understand the seamier aspects of wealth management begin by asking four questions.

First, is it a core KPI of the seller of financial products to conduct proper due diligence on source of funds.

Second, is it the obligation (both professional and moral) of an overseas branch office of that institution located in a financial tax haven to distinguish legitimate wealth flows from illegitimate flows and stop hiding behind the hypocrisy of “the corruption did not occur in our country so it’s OK so long as funds flowed through some banking channel”.

Third, should the current bonus system of wealth managers which incentivizes leveraged sales of speculative products be reviewed and strictly monitored.

And fourth, should banks stop treating senior wealth managers as untouchable prima donnas and use common sense policies of rotation, codes of conduct and conflict of interest mechanisms.

If you believe the answer to the above four questions is ‘Yes’ then read on as the above issues and practical solutions will be elaborated in this two part series.

Bankers are prone to use the terminology of “smell test” to identify something fishy or suspicious related to banking transactions.

This is good because funds flows through banks are under serious scrutiny by regulators since serious crime invariably has a financial motive and trail.

In practical terms the smell test boils down to due diligence and surprisingly for a discipline as sensitive and prone to manipulation as wealth management, due diligence has tended to get lax and loose.

The main reason for this is that retail banking divisions of most banks now have two principal drivers of revenue and profitability — wealth management and consumer finance.

The wealth management product range has also become more complex as financial derivatives are now increasingly being sold to retail customers.

As margins reduce in sales to sophisticated institutional and corporate clients, treasury departments (the financial engineering labs within banks) are collaborating more with wealth management departments.

But problems arise when unsophisticated customers — individuals and SME business owners — are sold complex products at times with misleading sales pitches that over emphasize gains and downplay the risks which are very real and can come back to painfully bite the clients.

Since most banks have jumped onto the wealth management bandwagon competition is intense and as has been seen with other banking disciplines like credit cards or sub-prime mortgages when a ‘herd’ mentality is adopted standards invariably slip.

What has slipped the most is the quality and effectiveness of due diligence when a customer wants to open a significant wealth management account or make a sizeable transfer.

It is surprising that the same bank which will insist on salary statements, proof of income and assets for a simple credit card will not raise the alarm bell when an account holder is effecting a deposit or transfer that bears little co-relation to his or her salary or sources of income.

Asking for a NPWP (tax) number, sighting the account number of another bank or simply believing the customer under pressure or charm (majority of wealth management meetings take place in luxurious settings in which wealthy clients show off to gullible relationship officers) is incomplete due diligence.

Like with other aspects of banking there need to be firm procedures and systems to differentiate between genuine customers and those which require deeper background checks.

Once illegitimate funds enter the banking system chances of effective laundering are high and the seamier side of wealth management has also enabled conduits to seemingly untraceable tax havens, trusts, front companies and so on.

Reputable global and local financial institutions cannot talk of Good Corporate Governance and then turn a blind eye to the seamier aspects of wealth management practice.

Reform must begin first at home. The price of financial penalties, criminal liability and worse reputation damage is far too high to compromise.

International banks that have large wealth management centers in financial tax havens must also ensure that they have additional screens to detect illegitimate wealth and implement a cast iron policy that they will not become facilitators, wittingly or unwittingly, of corruption related money flows.

The columnist is CEO of international management consulting firm IndonesiaWISE. Prior to become a senior strategy advisor to leading companies and institutions, he spent over 18 years in the international financial sector. The second part of this article will appear in the next edition of Insight.

President issues instruction on corruption prevention, eradication action plan

Antara News, Fri, May 13 2011

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has issued a Presidential Instruction (Inpres) on a Corruption Prevention and Eradication Plan, Vice President Boediono said.

He said the Inpres Number 9 of 2011 was issued on May 12 detailing concrete steps to prevent and eradicate corruption that must be taken by all state agencies receiving the Inpres.

"The Inpress contains guidelines on steps for strategic institutions to eradicate corruption within the executive branch of government," he said on the sidelines of a meeting attended by a number of cabinet ministers.

Among those attending the meeting were Finance Minister Agus Martowardojo, Attorney General Basrief Aried, head of the National Development Planning Board, Armida Alisjahbana, director of corruption cases of the National Police Headquarters, Brigadier General Ike Edwin and the chief of the President`s Working Unit for Development Control and Supervision (UKP4), Kuntoro Mangkusubroto.

Boediono said the issuance of the Inpres reflected the government`s commitment to preventing and eradicating corruption. Steps in corruption eradication and prevention cover six strategies and consists of 102 actions.

The six strategies include prevention, enforcement, harmonization of regulations and laws, saving corrupted assets, international cooperation and reporting mechanism.

"In essence it is re-ordering the working system, procedures and performance of offices considered important with regard to eradication of corruption including tax mafia which is the focus of the Inpres Number 9 of 2011," he said.

Among the offices to implement the Inpress are the police, the attorney general office, the ministry of justice and human rights and the ministry of finance.

"The Inpress is to be implemented and commitment of chiefs of the offices. It also gives a time line and monitoring system," he said.

He said the UKP4 was the one assigned to monitor its implementation.

Some points in the Inpres require the National Police chief to make a national police chief regulation and standard operating procedure on information openness.

The Inpres also mandates an SOP to regulate relations between investigators and outside parties such as lawyers, investigators` superiors and the public.

The Attorney General Office meanwhile is required to improve its SOP to cover the leaks that would make possible for judicial mafia to operate.

Editor: Priyambodo RH