Indonesia's Suharto tests president's mettle

JAKARTA, Oct 11 (Reuters) Ever since Indonesia's former president Suharto was ousted in the riots and financial chaos of 1998, he has fended off bids to seize a family fortune estimated at 15- billion dollars.

Tackling Suharto's wealth is crucial for President Susilo Bambang Yudhoyono, Indonesia's first directly elected leader, who won in 2004 on a promise to curb corruption and who will need to show some results if he seeks re-election in 2009.

Foreign investors and the business community are also closely watching the issue as an indicator of legal certainty and rule of law in Indonesia.

But, so far, attempts to recover money from Suharto's family have either been thrown out or seem likely to take years to wend their way through Indonesia's court system.

Suharto and his family have denied any wrongdoing. In fact, the former general has been more successful than his prosecutors in the battles over his wealth.

Time magazine yesterday said it will ask Indonesia's Supreme Court to review a libel ruling in favour of Suharto that ordered the U.S. weekly to pay more than 100 million dollars in damages and to print apologies.

Time, owned by Time Warner Inc, published a May 1999 cover story alleging Suharto and his family had amassed a fortune of around billion, including billion in an Austrian bank account.

Suharto and his family still wield considerable influence in the military and judiciary, analysts say. And with Indonesia's transformation from dictatorship to multi-party democracy, few politicians dare offend the family.

''The political spectrum is very fragmented and everyone is constantly negotiating coalitions,'' said Max Lane, associate, Indonesian Studies at the University of Sydney.

''At some time, you may need to rely on partners from the Suharto period, so you don't want to make enemies,'' he said.

''It will take another 10 years, a generation, before there is a more serious pursuit of the Suhartos' money.'' RECOVERING STOLEN ASSETS Last month, Yudhoyono met World Bank officials in the United States to discuss a new UN-World Bank initiative to help developing countries recover stolen assets.

The initiative cites Suharto and the former Philippines presidents Ferdinand Marcos and Joseph Estrada among ''10 of the notorious cases of the past few decades,'' and quotes a report by Transparency International which put Suharto's assets at 15-35 billion dollars, or as much as 1.3 per cent of gross domestic product.

In an effort to tackle Indonesian criminals who have hidden their money abroad, Yudhoyono has pushed for an extradition treaty with Singapore and an agreement allowing the pursuit of misappropriated funds held in Hong Kong bank accounts.

But in the domestic courts, state prosecutors have had little success in going after Suharto, who came to power in an anti-communist coup when an estimated 500,000 to one million people were killed.

By the time Suharto was forced to resign, he and his family and associates had permeated almost every nook and cranny of the Indonesian economy. They owned airlines, toll roads, hotels, TV and radio stations, and provided the gateway for any foreigner who wanted to do business there.

A criminal case against Suharto was dismissed in 2001 as the Supreme Court chief justice said he was too ill to stand trial.

Yet despite his medical problems, Suharto was well enough to host 200 or so guests for his 86th birthday party this year and to receive dignitaries such as Singapore's former prime minister, Lee Kuan Yew, who dropped in for a chat in July.

Decisions such as the Supreme Court ruling in favour of Suharto can have an indirect impact on Indonesia's economy.

''They are important for the economy because it says something about how far we have come in terms of transparency, rule of law,'' says Bill Belchere, Macquarie Securities' economist in Hong Kong.

Political analysts say the Time ruling was a setback for Indonesia, given that an investigation of the Suharto family is a matter of public interest and that state prosecutors have filed lawsuits to recover misappropriated funds.

''Indonesia is undergoing a process of reform, but that process is very slow, almost glacial,'' said Damien Kingsbury, an associate professor at Australia's Deakin University.

''The judiciary and the military are two areas which most need reform but which have been the least touched by the process, and these are two areas where the Suharto clan has strong links.'' Todung Mulya Lubis, the lawyer who represented Time magazine in the Suharto libel suit and chairman of Transparency International in Indonesia, says that Indonesia has been too slow in going after the Suharto family.

''Efforts to recover Suharto's wealth should have been done right after he stepped down. People are questioning: Why can't Suharto be brought to court?'' REUTERS ARB BD0947