There are encouraging signs from Indonesia that the Indonesian Bank Restructuring Agency (IBRA) is getting tough on its recalcitrant debtors. The catalyst is the recent signing of a new letter of intent with the International Monetary Fund (IMF), which states that all negotiations with problematic debtors have to have been concluded by October this year.
The Indonesian Attorney-General Marzuki Darusman said on Monday that owners of banks taken over by IBRA in the aftermath of the financial crisis have until September to reach agreement with IBRA otherwise the Committee for the Settlement of Problematic Debtors will take legal action against them in October. The committee - which was set up in July - has special powers to force debtors to reach agreements, including the authority to confiscate debtors' assets and enforce a travel ban on company directors.
Action taken
Already, IBRA has handed over to the attorney-general’s office its dealings with four banks – Deka, Centris, Pelita and Istismarat – after negotiations to reach a settlement on their debts failed. Furthermore, IBRA is taking a more active involvement in the actual running of some of the companies under its charge. The agency has announced that it is looking to merge the Chandra Asri Petrochemical Company with other petrochemical companies, such as TriPolyta or Trans Pacific Petrochemical Indotama, in order to make the company more attractive to potential buyers.
IBRA has reiterated that it will not allow any of the seven conglomerates bound by the Master Settlement of Acquisition Agreement (MSAA) to change the terms of the agreement. Amir Sambodo, a director of IBRA, did however point out that many of the assets handed over by directors of these conglomerate to pay off their debts are worth much less than the value of these debts.
Coordinating Minister for Economy, Finance and Industry, Kwik Kian Gie has also reiterated the government’s adherence to the MSAA while pointing out that there are some flaws in it. “It is unreasonable for the Salim Group to pay its debt of Rp51 trillion ($4.7 billion) with assets that sell only at Rp10 trillion,” he said on Tuesday. “It is more unreasonable if the buyer is the Salim Group itself.”
Comments such as this and the actions against the companies and banks under government supervision should give investors solace that the government is serious about reform and regeneration. The political problems of President Wahid’s government and the ongoing violence throughout the country paint a bleak picture for investors. But behind the headline grabbing incidents of political infighting and sectarian violence, real efforts at reform are taking place.
If the Indonesian government can start to get substantive results from IBRA and recoup some of the money it lost in the crisis, it will go a long way to encouraging fresh investment into the country. This is something that is desperately needed if Indonesia is ever to regain its position as one of the most important economies in Asia. The government appears willing to do its part. It is now up to Indonesia’s famously recalcitrant debtors to do theirs.
