Committee reveals flaws in debt extention plan<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
A review by a government watchdog has exposed glaring
\nimbalances in a plan to extend the payment period for large
\ndebtors of the Indonesian Bank Restructuring Agency (IBRA) that,
\nif not revised, risked the government's effort to recoup some $13
\nbillion in lost state funds.<\/p>\n
In what marks another hit at the controversial debt extension
\nplan, the independent Oversight Committee (OC) said on Thursday
\nthat only cooperative debtors should be eligible to benefit from
\nthe plan.<\/p>\n
This would rule out the majority of debtors, whom IBRA says
\nare uncooperative but in respect of whom the plan is actually
\ntargeted.<\/p>\n
\"For the sake of justice, the FSPC decision, if applied,
\nshould consider whether debtors have shown good will or not,\" OC
\nchairman Mar'ie Muhammad said in a statement.<\/p>\n
The OC said that various of its studies had shown that most
\ndebtors had shown a \"lack of good will\" in meeting their
\nobligations.<\/p>\n
Its recommendations are not binding. But the OC reports to the
\nFinancial Sector Policy Committee (FSPC), which groups together
\nsenior economics ministers in charge of IBRA's large debt deals.<\/p>\n
The FSPC approved an IBRA initiated plan last month to grant
\ndebtors an extension of their repayment periods, which for many
\nend this year.<\/p>\n
The shareholders' settlement program applies to former bank
\nowners, whose banks the government bailed out of the financial
\ncrisis in the late '90s.<\/p>\n
It later turned out that most had misused the bailout funds,
\nincluding redirecting them to affiliates in violation of Bank
\nIndonesia's legal lending limit ruling.<\/p>\n
To avoid prosecution, the former bankers agreed to a four-year
\ncash and asset settlement program, starting in 1998.<\/p>\n
But three years into the program, almost all have been
\navoiding repayment, which has led IBRA to bring in the debt
\nextension plan.<\/p>\n
Under the plan, debtors will have up to 10 years instead of
\nfour, and must pay interest of at least only 9 percent as against
\nthe current rate of some 17 percent, depending on Bank Indonesia
\nbenchmark rates.<\/p>\n
But as the easier terms of payment have attracted public
\ncriticism, the OC has identified more imbalances that may come at
\nthe expense of IBRA.<\/p>\n
The plan offers debt haircuts as incentives, which the OC says
\nshould be given only after debtors repay their debts.<\/p>\n
The OC also noted the absence of any measures to prevent
\ndebtors from stripping off the value of their assets before
\nhanding them over to IBRA.<\/p>\n
Debtors who, according to an internal IBRA audit, owe more
\nthan their present debt deal stipulates, should have their deals
\nrevised upwards to reflect the actual amount, the OC added.<\/p>\n
It said the former bankers should only be released from the
\nthreat of prosecution after they had settled their debts, and not
\nbefore.<\/p>\n
The plan has yet to receive the governments' full support, and
\nan interministerial team is currently at work reviewing it.<\/p>",
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