Asset redistribution must put people first<\/p>\n
Several commercial banks have failed to repay liquidity
\nsupport to Bank Indonesia, the central bank, because their debtor
\ncompanies defaulted on repaying their debts. Economist Kwik Kian
\nGie discusses the possible redistribution of assets after the
\nacquisition of the banks and their debtor firms by the
\ngovernment.<\/p>\n
JAKARTA (JP): Some experts have disclosed that redistribution
\nof assets is possible now because thousands of companies will
\ncome into the government's possession after the failure of many
\nmajor commercial banks to repay the liquidity support they
\nreceived from Bank Indonesia.<\/p>\n
Based on the new bankruptcy law, it will be easy for the banks
\nto confiscate assets of the debtor companies which failed to
\nrepay on their borrowing. Because the banks have been confiscated
\nby the government, the latter will suddenly own thousands of
\nfirms, according to experts quoted by Kompas daily in its Aug. 27
\nedition.<\/p>\n
Affected by the stagflation (stagnant growth-high inflation)
\neconomy, the debtor companies are now suffering from huge losses;
\nsome of them have even stopped operation. Because their assets
\nare calculated on the basis of a discounted cash-flow method
\nwhile their debts are carrying interest rates of up to 60 percent
\nper annum, their cash flow is nil and their net worth negative.<\/p>\n
With liquidity support provided by Bank Indonesia reaching
\nabout Rp 140 trillion (US$11.6 billion), the number of companies
\nto be confiscated by the government may reach thousands or even
\ntens of thousands.<\/p>\n
Redistribution of assets is unknown in noncommunist countries,
\nwhere income redistribution is introduced, particularly through
\ntaxation. Redistribution of assets is generally introduced
\nthrough the nationalization of existing companies by a country
\ntransforming its political system from capitalism to communism.<\/p>\n
Indonesia is, of course, not a communist country and is even
\nopposed to communism. But economic depression, stagflation, poor
\nmanagement and supervision of banks, pragmatist and reactive
\nmonetary management and avaracious rent-seeking parties are
\ndriving the Indonesian economy toward a communist system. With
\nthe realization of the situation, some figures are welcoming the
\npossible redistribution of assets because, caught up in their
\nemotional euphoria, they see the possibility of acquiring
\ncompanies at low prices.<\/p>\n
Redistribution of assets is actually a completely new
\nideology, whose implementation in Indonesia does not guarantee
\nprosperity for the people. If the assets of the confiscated
\ncompanies were distributed freely to the people or cooperatives,
\nhow should the criteria be set for those eligible to receive
\nthem? If they were sold at certain prices, how could the poor
\nafford to buy them?<\/p>\n
The possible answer is that the assets should not be
\ndistributed to individuals but should be instead controlled by
\nthe state, so their benefits could be equally enjoyed by the
\npeople.<\/p>\n
It is true that such a case should not necessarily mean the
\nimplementation of communism because some companies have no bad
\ndebts. But the majority of firms in the country have their debts
\ngoing sour.<\/p>\n
According to government officials, the state's ownership of
\nthe troubled companies and banks will be temporary as their
\nshares will be offered to the public through the Jakarta Stock
\nExchange. If that is the case, only rich people will be able to
\nbuy them, whereas the most eligible targets of asset distribution
\nshould be the poor, whose deprivation has stimulated the
\ninternational community to provide $14 billion in aid through the
\nInternational Monetary Fund (IMF) and the Consultative Group on
\nIndonesia (CGI).<\/p>\n
Perhaps, foreign investors will be willing to buy the
\ncompanies' shares if their assets are calculated on the basis of
\na 10 cent-for-the-dollar method. But if that is the case, the
\ngovernment will never recover the entire amount of its liquidity
\nsupport for the troubled banks.<\/p>\n
The Indonesian economy would also return to its condition
\nduring the colonial period, when economic activities were
\ndominated by Dutch companies. After independence, the firms were
\nnationalized or their management Indonesianized.<\/p>\n
During the New Order era, the government persuaded foreign
\ninvestors to enter Indonesia by offering various incentives.
\nIndonesia was then open for the operation of foreign companies
\nunder a modern term of globalization.<\/p>\n
The government, therefore, was very active, participating in
\nvarious international organizations, such as the Asia Pacific
\nEconomic Cooperation (APEC) forum, while the private sector,
\nparticularly its conglomerates, was establishing close links with
\nforeign investors and creditors until their offshore debts
\nreached $80 billion.<\/p>\n
The debt-supported ballooning economy exploded when many of
\nthe companies' debts matured at the same time. Now comes the idea
\nto sell companies to foreign investors at low prices, bringing
\nIndonesia's economic development in a full circle: Colonization-
\nnationalization-Indonesianization-globalization-foreignization
\n(just like colonization). But technocrats will no doubt argue the
\nfine point that foreignization and colonization are not
\ninterchangeable.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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