Bambang defends program for bank recapitalization<\/p>\n
JAKARTA (JP): The government has defended its plan to set
\naside Rp 18 trillion (US$2.25 billion) of the 1999\/2000 state
\nbudget to recapitalize the country's beleaguered banks, saying it
\nwas the least the country could do to help revive the banking
\nsector.<\/p>\n
Finance Minister Bambang Subianto said on Monday night the
\nfunds were crucial in freeing the country from the banking crisis
\nthat had been eating up the economy for over a year.<\/p>\n
\"There are two choices: recapitalize or close down the banks.
\nBoth moves need financial support, but the recapitalization
\nprogram does not need as much cash,\" he told a briefing on the
\ndraft budget the night before it was unveiled by President B.J.
\nHabibie.<\/p>\n
\"Recapitalization is the only choice that we think is capable
\nof convincing the people that the banks that survive the crisis
\nwill be those that are completely healthy,\" he said.<\/p>\n
The government plans to issue bonds to finance the
\nrecapitalization program amounting to over Rp 257.7 trillion.
\nBut banks which participate in the program will only be injected
\nwith cash from the yearly interest payment on the bonds.<\/p>\n
Bambang said the government estimated it would spend Rp 34
\ntrillion in interest payments for the banks for the coming fiscal
\nyear.<\/p>\n
Only Rp 18 trillion of the amount would come from the state
\nbudget, while the remaining Rp 16 trillion would come from the
\nsales of the banks' assets, he said.<\/p>\n
Bank Indonesia Governor Sjahril Sabirin said Tuesday after the
\ndraft budget was announced by the President that the bond would
\ncarry an interest rate of about 20 percent, 3 percent above the
\ngovernment's own projection for inflation this year.<\/p>\n
Bambang also claimed the recapitalization sum needed to
\nfinance the banks which would make up 29 percent of the country's
\ngross domestic product was relatively small compared to similar
\nprograms held in other countries.<\/p>\n
In Korea, recapitalization programs took up 17 percent of the
\nGDP, in Thailand 29 percent and Malaysia 17 percent, he cited.<\/p>\n
At least 70 out of the 166 local commercial banks would
\nparticipate in the program, and the government would provide 80
\npercent of the program's funds.<\/p>\n
Those with a capital adequacy ratio (CAR) -- risk-weighted
\nassets ratio -- of less than minus 25 percent are not eligible to
\nparticipate in the program, and, unless they inject fresh
\ncapital, would be closed down.<\/p>\n
Banks with CAR over 4 percent do not have to be recapitalized.<\/p>\n
Regional autonomy<\/p>\n
Also speaking at Monday night's briefing, the State Minister
\nof National Development Planning, Boediono, said the government
\nwas determined to loosen control over the provincial and lower
\nlevels of administration in the country.<\/p>\n
This was reflected in the draft budget in a bid to let the
\nless developed regions benefit from their own resources, Boediono
\nsaid.<\/p>\n
The government will increase the portion of the development
\nbudget for the provincial administration, as well as development
\nactivities by shifting the budget away from the center.<\/p>\n
The amount that will be allocated for the provincial
\nadministration as development funds totals Rp 16.46 trillion.<\/p>\n
It will let the provincial and lower government bodies
\nauthorize approvals for development projects under their
\njurisdiction, instead of them having to go through the central
\ngovernment.<\/p>\n
It will also adjust the block grants for the provinces by
\ntaking account of a region's non-renewable natural resources as
\nwell as their income.<\/p>\n
Boediono said the shift in the emphasis of development toward
\nthe less-developed areas of the country was part of the
\ngovernment's efforts to develop stronger social safety net
\nprograms and empower small-scale businesses and cooperatives.<\/p>\n
The budget, for example, will now be apportioned mostly for
\nsmaller-scale infrastructure projects in villages which can
\nemploy many people instead of large projects as in the past.<\/p>\n
\"When we build infrastructure in villages we also provide jobs
\nfor the locals,\" he said.<\/p>\n
As part of the government's resolution to strengthen the small
\nand medium scale enterprises (SMEs) and cooperatives this year,
\nthe government will set aside a substantial amount in the draft
\nbudget.<\/p>\n
This includes Rp 629.21 billion for small-scale industry and
\nRp 4.39 trillion for the farming sector, in addition to the Rp
\n1.33 trillion apportioned for technical and capital assistance
\nfor cooperatives and SMES. The draft budget also earmarks Rp
\n175.45 billion to support the recovery program in the trade
\nsector.<\/p>\n
\"This is the most we've ever given to develop small businesses
\nthrough budgetary support,\" Ginandjar said. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bambang-defends-program-for-bank-recapitalization-1447893297",
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