Asset management company<\/p>\n
The asset management company (AMC), which is being established
\nby the government to administer assets left behind by the
\nrecently dissolved Indonesian Bank Restructuring Agency (IBRA)
\nwill certainly be in a much better position to gain a higher rate
\nof asset recovery.<\/p>\n
At least five factors will boost the performance of AMC within
\nits five-year tenure, even though the company will not be backed
\nby the extra-judicial powers that were vested in IBRA, and the
\nassets are the worst of those left over from the 1997-1998
\nfinancial crisis.<\/p>\n
First, different from IBRA -- which was charged simultaneously
\nwith the challenging tasks of restructuring banks and bad
\ncredits, disposing of assets and managing the blanket guarantee
\non bank deposits and claims -- AMC will be responsible only for
\nmanaging, maximizing the value of assets, and disposing of the
\nassets it will take over from IBRA.<\/p>\n
AMC is also being incorporated as a limited-liability, profit-
\noriented state company, unlike IBRA that was set up entirely as a
\ngovernment agency and thereby fully subject to arduous
\nbureaucratic procedures. The AMC board of directors will work
\nentirely on the basis of a management contract with the Ministry
\nof Finance. This is strikingly different from the IBRA management
\nwhich had always been the target of political party rivalries and
\nwas highly vulnerable to political pressure.<\/p>\n
Also different from conditions in 1998, when there were hardly
\nany financial professionals with expertise in debt recovery
\n(which was understandable because the country had never before
\nundergone such a massive financial crisis) AMC can now easily tap
\ninto former IBRA employees who built up experience over the past
\nfive years. Therefore, the finance minister's decision to recruit
\nall but one of the seven members of the AMC board of directors
\nfrom among former senior officials of IBRA simply makes sense.<\/p>\n
Managing the distressed assets, maximizing their value and
\ndisposing of them to good investors isn't a simple task. The
\nprocess requires high skills and experience in processing bad
\ndebt work-out, with a viable business plan, including packaging
\nassets to make them more attractive to new investors. This may
\nboil down to polishing up the assets, or prospecting for gold
\nwithin the bad loans and other distressed assets.<\/p>\n
It is a great advantage to AMC that the Rp 10.81 trillion
\n(US$1.27 billion) worth of distressed assets ( estimated market
\nvalue) it will take over from IBRA have been verified as clean
\nand free. That means the legal status of their ownership has been
\nfirmly established and their disposal will not likely risk any
\nlaw suits.<\/p>\n
This is strikingly different from the conditions experienced
\nby IBRA. The agency was virtually treated as the dumping ground
\nfor all forms of distressed assets. Certainly, investors will put
\na higher value on assets already legally verified as this legal
\ncertainty removes any risk of litigation.<\/p>\n
Yet the biggest advantage AMC will have in performing its
\ntasks is strong macroeconomic and political stability -- now and
\nwithin the next five years -- barring any unrest in the upcoming
\nlegislative and presidential elections. Overall stability will
\nobviously improve the economic outlook, and this in turn will
\nincrease the assets market value and strengthen interest in the
\nassets to be offered by AMC.<\/p>\n
It is not clear how the Ministry of Finance established the
\nmarket value of distressed assets, with a total book value of Rp
\n108.5 trillion, at only Rp 10.8 trillion, or a mere 10 percent of
\ntheir book value. The ministry didn't specify which factors were
\nresponsible for such a low market value, or the price at which
\nthe assets from IBRA will be transferred (transfer price) to AMC.
\nCertainly, the quality of the assets is much lower than that of
\nthose already disposed of by IBRA, with an average recovery rate
\nof 28 percent (of book value).<\/p>\n
We nevertheless are confident that the more favorable economic
\nand political conditions in which AMC will operate, and the
\nadvantages AMC will enjoy, will greatly contribute to increasing
\nthe market value of the assets and will enable AMC to achieve a
\nrecovery rate much above their transfer price.<\/p>\n
Most important though is for the government to establish a
\nclear strategic directive, business plan and targets, and high
\nstandards of transparency and accountability for AMC to meet, and
\nto see to it that the AMC board of directors operates without
\npolitical intervention.<\/p>\n
__________<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/asset-management-company-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }