Analysts doubt divestment plan<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Given the failed sale of Bank Niaga, the government will find
\nit difficult to carry out its ambitious plan of selling three
\nmore banks this year, analysts said.<\/p>\n
In view of the Bank Niaga case, in which the government failed
\nto sell the bank by the initial June deadline, selling three more
\nbanks was a tough job for the government to complete, economist
\nRaden Pardede said.<\/p>\n
\"It will be difficult for the government to conduct the bank
\nsales this year,\" Raden, of the Danareksa Research Institute,
\ntold The Jakarta Post on Thursday.<\/p>\n
Under the latest Letter of Intent (LoI) signed on Tuesday, the
\ngovernment promised the International Monetary Fund (IMF) that it
\nwould sell Bank Niaga as well as three other banks; Bank Mandiri,
\nBank Lippo and Bank Danamon, by the end of the year.<\/p>\n
The LoI contains a set of economic reform programs agreed upon
\nby the government and the IMF. Failure to comply with the program
\nwill lead to a halt in the disbursement of lending from the fund.<\/p>\n
The government plans to launch the sale process of the
\nmajority stake of Bank Danamon next month with the sale expected
\nto be completed by the end of the year, followed by the launch of
\nthe sale of a majority stake in Bank Lippo.<\/p>\n
It is also committed to initiating the sale process of a 30
\npercent stake of Bank Mandiri, the country's largest bank in
\nterms of assets, by the third quarter of the year.<\/p>\n
Earlier, the government decided to cancel the sale of Bank
\nNiaga through a strategic sales scheme due to low bidding prices
\nfrom interested buyers.<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) then extended
\nthe deadline to mid-September with the stake to be sold
\nincreasing to 71 percent from the previous 51 percent.<\/p>\n
\"I am pessimistic that the government can finalize all (the
\nsales of four banks), now that we're entering the second semester
\nof the year,\" Anton Gunawan, Citibank economist, told The Post.<\/p>\n
Anton added investors would closely watch how the government
\nwould carry out the new sales process of Niaga, warning that more
\ndelays in the process could eventually disrupt the sales of other
\nbanks.<\/p>\n
IBRA expects to sell a 20 percent stake of Niaga to the stock
\nmarket by the end of the month, which will be followed by the
\noffering of the other 51 percent to strategic investors. IBRA
\nholds 97.17 percent of Niaga with the remainder held by the
\npublic.<\/p>\n
Both Raden and Anton pointed out that the main problem that
\ncould hamper the selling of the banks would revolve around
\nbidding prices.<\/p>\n
\"Just as in the Niaga case, there will be a significant
\ndifference between the valuation of the banks by the seller and
\nthe buyers,\" Raden said.<\/p>\n
Anton concurred, \"It's better for IBRA to set out a minimum
\nprice first, and then announce that if no bidders comply with
\nthat price then the sale process would be canceled\".<\/p>\n
Another factor that could threaten the plan would be the
\ngrowing pressure from various quarters on the government to
\ntemporarily stop the banks' divestment process, especially those
\nholding recapitalized bonds.<\/p>\n
Such pressure will predictably come from State Minister of
\nNational Development Planning Kwik Kian Gie, who has gained
\nstrong support from some political leaders in his campaign
\nagainst the selling of recapitalized banks. Kwik argued that
\nselling those banks will only mean the government will have to
\n\"subsidize\" future owners of the banks with its interest payments
\non bonds.<\/p>",
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