Dr. Terry Lacey

Development Economist

For thousands of years the Nama people of Southern Africa maintained a nomadic pastoral way of life, tending their flocks of goats and sheep, gathering firewood, and collecting wild honey. It is rumored the mythical Irish tiger, along with the Irish people, might now be lost in Namaland.

The National Asset Management Agency (NAMA) is being created by the Irish government to finance bankrupt bankers and builders.

Gathering firewood and collecting honey might be more lucrative and tasty then Irish taxpayers paying out up to €75 billion Euros on this burgeoning bailout.

The logic is based on a new branch of Irish mathematics whereby two and two no longer add up to four right now, but might do later on.

Nama is going to buy up to €75 billion Euros of over-valued property loans (one third each on land, commercial property and projects under development) in the hope this will get bankers banking and builders building.

It is hoped the “price cycle” will mean that property prices, now at rock bottom, will rise again in the next five to seven years, so taxpayers will get a lot of their money back. Or not.

If it doesn’t work, the people who dreamed it up can get on their bike. Meanwhile the Irish people will be pedaling hard to pay for it all.

Shane Ross reports in the Sunday Independent (02.08.09) that Prime Minister Brian Cowen, Finance Minister Brian Lenihan, the Financial Regulator and the banks and accountants all back it. Next month the Dail (lower house) and Seanad (upper house) will also advise and consent.

But the Irish government may not be completely daft. Marc Coleman says they do not want to pay too much for these assets, not knowing when property values will recover. Nama will be the monopoly buyer, so it can fix prices in a way that’s fair to taxpayers, with discounts of 30 to 40 percent. Or else nationalization looms. The public will not accept to be “taken to the cleaners”.

An Irish Sunday Independent/Quantum Research survey shows 65 percent of Irish people believe the banks will be better off in Namaland, 27 percent believe the builders will be better off and only 8 percent believe Irish taxpayers will eventually benefit.

So in the land of the Blarney stone, which is supposed to confer the gift of the gab, it would appear Taoiseach Brian Cowen (the Irish Prime Minister) did not yet make it all clear enough, although he tried to do so at the Galway Races, a good place to explain he was gambling with public money.

The comparison between the Indonesian Banking Restructuring Agency (IBRA) set up to tackle the 1998 Indonesian banking crisis and the Irish National Asset Management Agency (NAMA in 2009) is rather striking.

Bill Guerin writing in Asia Times Online in January 2004 five years after the Indonesian bank crash described a web of fraud, non-compliance, irregularity, misappropriation, undue preferential treatment, concealment, bribery and corruption involving various institutions, particularly the IBRA and the Indonesian central bank.

In cash-strapped Ireland, with recession, the bank crash, a collapsed property market and unemployment, public anger is rising against bankers and speculators, and the excessive expenses of TDs (members of parliament), with extensive public mistrust of the state-backed gravy train that is keeping afloat what is perceived as a failed political class and their private sector cronies.

The Sunday Independent argued, “The Government has a duty to rebuild public faith in the political system”. When the same thing happened in Indonesia it was a political regime that fell, not just the Soeharto government.

Then Indonesia made a fresh start, now being continued by President Susilo Bambang Yudhoyono and his squeaky clean financial team. If the Irish banks and economy could achieve Indonesian performance levels, with 4.5 percent growth in a global downturn, then the Irish tiger would be back in business.

As the Irishman stuck up to his neck in an Irish bog said when asked the way to Dublin, “Its best not to start from here”. But maybe a closer look at the Indonesian IBRA experience might help the Irishman to get out of the bog faster. They used to say go West young man, but now its go East.

Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.

You can contact the author’s emails: terrylacey2003@yahoo.co.uk or drterry@c4d-info.org

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