Budget at risk as BCA, Gresik sales in doubt<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
Fresh doubts over the planned sale of PT Bank Central Asia
\n(BCA) and cement firm PT Semen Gresik will jeopardize deficit
\nfinancing for this year's state budget, as the government finds
\nitself short of options to secure alternate funding, say experts.<\/p>\n
Economist Raden Pardede at the Danareksa Research Institute
\nsaid a decision to waive on a US$520 million sale of Semen Gresik
\nhad put the survival of the budget at risk.<\/p>\n
That has compounded concerns about the planned sale of BCA, as
\nforeign investors' interest was slack, he added.<\/p>\n
\"This is a serious threat to the budget, the government must
\nact on it quickly,\" he told The Jakarta Post over the weekend.<\/p>\n
The government hopes to contain this year's budget deficit at
\nRp 54.31 trillion or 3.7 percent of gross domestic production
\n(GDP).<\/p>\n
To help fill the deficit, the government has targeted
\nprivatization proceeds of Rp 6.5 trillion (about $633 million),
\nplus Rp 27 trillion in asset sales under the Indonesian Bank
\nRestructuring Agency (IBRA).<\/p>\n
The other source of financing for the deficit is foreign
\nloans.<\/p>\n
There have been no proceeds from privatization so far, while
\nas of September, IBRA was Rp 8 trillion behind target.<\/p>\n
Gadjah Mada University economist Sri Adiningsih also expressed
\nconcern over the slow progress of the privatization program, but
\nsaid that the government could use last year's excess budget of
\naround Rp 10 trillion to help finance this year's deficit if
\nproceeds from asset sales were not enough.<\/p>\n
\"This can be used as a last option,\" she said, dismissing
\nfears that the government might have to stop paying the salaries
\nof civil servants due the lack of revenue.<\/p>\n
Sri said that the relatively high price of oil during the
\nfirst half of this year, which was higher than the budget
\nassumption of $24 per barrel, should bode well for the budget.<\/p>\n
The oil price fell below the budget assumption following the
\nSept. 11 terrorist attacks on New York and Washington.<\/p>\n
Sri said, however, that budget spending this year could be
\nhigher than estimated particularly due to high domestic interest
\nrates which inflated spending to cover the interest of government
\nbank recapitalization bonds.<\/p>\n
The budget assumes Bank Indonesia's three-month promissory
\nnotes (SBI) rate at an average of 15 percent, but the rate has
\nbeen hovering at around 17 percent during the past couple of
\nmonths.<\/p>\n
Part of the government bonds carry a floating interest rate
\nlinked to the SBI rate.<\/p>\n
The government skipped an Oct. 26 deadline for selling Semen
\nGresik to Mexican firm Cemex SA de CV, due to protests from
\nregions where Semen Gresik owns operations.<\/p>\n
A new deadline was set for December. But there is no guarantee
\nthat by then the team assigned to evaluate Semen Gresik's sale
\nwill decide in favor of divestment.<\/p>\n
Opposition to the sale remains high, receiving support from
\nsome legislators airing antiforeign sentiments.<\/p>\n
Banking analyst Mirza Adityaswara said IBRA's planned sale of
\nBCA is increasingly looking like what could be double jeopardy.<\/p>\n
\"On one hand, we don't want to sell the bank to a dubious
\ninvestor, on the other hand, if no one passes the fit and proper
\ntest, it won't look good for the state budget either,\" he said.<\/p>\n
IBRA announced last week a list of 18 bidders for BCA. Local
\nbidders dominate the list with 11 names, signaling that foreign
\ninterest in the once largest private bank is slack.<\/p>\n
Mirza estimated the foreign bidders joining the bid may not go
\nall out to obtain the 51 percent stake in BCA on offer.<\/p>\n
He said some of the local bidders may be lacking either in
\nadequate funding or credibility to pass Bank Indonesia's fit and
\nproper test.<\/p>\n
Mirza said that options were limited for the government to
\nreplace BCA's proceeds, if no one passed the tender.<\/p>\n
Danareksa's Raden agreed, saying the government could not
\nafford to forego either of the two asset sales, let alone both.<\/p>\n
The state budget, which is already running tight, offered
\nlittle room for further cuts, he said.<\/p>\n
\"Trimming the regional allocation funds isn't a good idea, as
\nit would harm regions' budgets,\" he said.<\/p>\n
Former finance minister Bambang Sudibyo said the government
\nmay still rake in higher revenue from taxes, excise and sales of
\noil and gas.<\/p>\n
These, however, would have to surpass a surge in spending to
\nmake up for the shortfall in asset sales.<\/p>\n
\"The question remains, how is the government going to cover
\nthe budget deficit?\" Bambang told the Post.<\/p>",
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