BI mulls temporary measures to speed economic recovery<\/p>\n
JAKARTA (JP): Bank Indonesia deputy governor Subarjo
\nJoyosumarto said on Thursday that the central bank was
\nconsidering to launch temporary measures to help accelerate the
\ncountry's economic recovery.<\/p>\n
Subarjo said the new measures might include a guarantee on new
\nlending made by banks to debtor companies which were being
\nrestructured.<\/p>\n
He said the guarantee would eliminate the lending risk, thus
\nallowing the bank to be exempted from the requirement of setting
\naside a provision for the loans.<\/p>\n
He said this would ensure that the bank's capital adequacy
\nratio (CAR) would not drop below the minimum 4 percent
\nrequirement.<\/p>\n
"But this exemption is only temporary and it will be stopped
\nonce the economy has recovered," he told reporters at his office.<\/p>\n
Subarjo said the new measure was part of the efforts by the
\ncentral bank to help expedite the country's corporate
\nrestructuring program.<\/p>\n
He explained that the central bank would start focusing on
\ndebt restructuring after the bank restructuring and
\nrecapitalization program was completed in June.<\/p>\n
He said the central bank would cooperate with other related
\ngovernment institutions.<\/p>\n
He said despite the near completion of the bank restructuring
\nand recapitalization program, the country's banking institutions
\nwere still facing obstacles in resuming lending because of slow
\nprogress in the corporate restructuring side.<\/p>\n
Indonesia's business sector has long urged the banking
\nindustry to resume lending. But the banks will not channel fresh
\nmoney until the huge amount of nonperforming loans (NPLs) owed by
\nthe real sector have been restructured.<\/p>\n
Over Rp 200 trillion worth of NPLs have been transferred to
\nthe Indonesian Bank Restructuring Agency (IBRA) to be
\nrestructured.<\/p>\n
Part of the NPLs handled by IBRA might be transferred to the
\nJakarta Initiative Task Force (JITF) particularly in the case
\nwhere IBRA was a minority creditor.<\/p>\n
JITF is a government-sponsored debt restructuring agency. It
\nis also designed to facilitate the restructuring of some US$70
\nbillion in private sector overseas debts.<\/p>\n
The government had earlier promised regulatory incentives
\nincluding tax breaks for debtors who showed good faith to
\nnegotiate and repay their debts, while uncooperative debtors
\nwould risk being transferred to the Attorney General's Office for
\nbankruptcy proceedings.<\/p>\n
Separately, JITF chairman Laksamana Sukardi said on Thursday
\nthat the incentives would be ready soon.<\/p>\n
"The tax break facility for companies being restructured will
\nbe realized in two months time," Laksamana told reporters on the
\nsidelines of a seminar.<\/p>\n
He said the facility was included in the new tax law currently
\nbeing drafted with the House of Representatives.<\/p>\n
The draft tax law is expected to be approved by the House some
\ntime in June.<\/p>\n
Laksamana said the tax incentive included an installation of
\ntax obligations, deferred tax payment and a reduction of the tax
\nrate or amount to be paid.<\/p>\n
Many Indonesian companies have simply stopped servicing their
\ndebts, particularly after the rupiah crashed in terms of value to
\nthe U.S. dollar in the middle of 1997 and the economic
\ncontraction that followed.<\/p>\n
Subarjo said the other temporary banking measures were a
\npolicy on the legal lending limit and the CAR requirement. He
\ndeclined to elaborate.<\/p>\n
Elsewhere, Subarjo warned the country's 162 banks that they
\nmust have a minimum CAR level of 8 percent by the end of 2001,
\nand an NPL size of not more than 5 percent or they would run the
\nrisk of serious consequences, including liquidation.<\/p>\n
He said banks must have an 8 percent CAR level to be able to
\nsupport the country's full economic recovery, projected to occur
\nin 2002.<\/p>\n
Subarjo added that all banks must also have a minimum CAR
\nlevel of 4 percent by the end of June.<\/p>\n
He said banks failing to meet the deadline would either be
\nclosed or recapitalized again by the government, depending on
\nwhich measure cost less.<\/p>\n
He also said the average CAR level of the country's 162 banks
\nin January 2000 was 7.15 percent.<\/p>\n
The two largest banks are Bank Bali and state Bank Tabungan
\nNegara (BTN).<\/p>\n
The recapitalization program of Bank Bali, which was
\nnationalized by the government, was disrupted for a long time
\nfollowing its high profile scandal last year. (rei\/udi)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-mulls-temporary-measures-to-speed-economic-recovery-1447893297",
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