Danareksa strives to boost accountability, performance<\/p>\n
Faced with various problems in its operations, state-owned
\nfinancial management firm PT Danareksa is striving to boost its
\nperformance by improving internal control to prevent leaks in the
\nfunds it manages.<\/p>\n
Nurtured in the captive market of state enterprises and
\ngovernment support, Danareksa is the country's largest integrated
\ninstitution operating in the investment banking, debt capital
\nmarket, equity capital market and investment management.<\/p>\n
Danareksa's newly appointed president director Lin Che Wei
\nshared his views with The Jakarta Post's Rendi A. Witular about
\nhow the company should be managed. The following are excerpts
\nfrom the interview.<\/p>\n
Question: What serious problems in Danareksa have been
\ninherited from previous managements?<\/p>\n
Answer: The most significant problem for Danareksa is that the
\ncompany is not focusing on its business. Its direction is not
\nclear, with so many conflicting businesses engaged in by former
\nmanagements.<\/p>\n
For example, previous managements focused more on \"proprietary
\ntrading\", meaning the company conducted trading for its own book.
\nThe company sold or bought stocks and bonds for its own benefit
\nand at the same time functioned as a broker for investors.<\/p>\n
The priorities in these transactions are unclear as the
\ncompany is playing two roles: as a broker for its customers and
\nas a company seeking profit from its selling and trading
\nportfolio. Before investors decide to use the company's services,
\nthey often ask what are Danareksa's priority is -- providing
\nservice to the investor or gaining profit for its own book.<\/p>\n
If we can refocus our operations, I'm sure Danareksa can
\nmaximize its functions as it already has a big name, a captive
\nmarket and government support.<\/p>\n
In the first six months of this year, the company only managed
\nto achieve some 10 percent of its targets. But I was able to
\nachieve between 40 percent and 50 percent of the full year target
\nin less than a month.<\/p>\n
How do you expect to fix this problem?<\/p>\n
We will focus our business on investment banking, such as
\nacting as advisor and underwriting. We expect one third of the
\nbusiness will come from the private sector and the remainder from
\nstate enterprises. We cannot focus our business entirely on state
\nfirms, which have long been our captive market. How can we
\nbenchmark ourselves if we do not deal with private sector
\nclients.<\/p>\n
Aside from this business, we will also focus on fee-based
\nbusiness. We plan to avoid risky businesses like those engaged in
\nby previous managements.<\/p>\n
We've heard that Danareksa has big non-performing loan (NPL)
\nproblems. How do you expect to resolve this problem?<\/p>\n
NPLs in this company are huge. The consolidated amount of bad
\ndebts here could reach between Rp 800 billion (US$80.8 million)
\nand Rp 900 billion. In this first semester, we have agreed to set
\naside a provision of Rp 248.9 billion for the bad debts.<\/p>\n
The bad debts are a result from various irregular transactions
\napproved by previous managements. As you know, the government, as
\nthe sole shareholder in the company, has not given discharge and
\nacquittal to the previous management. They (the previous
\nmanagement) must be called to account for the problems at
\nDanareksa.<\/p>\n
We have launched a special audit to find irregularities, and
\nits findings will be followed up on by the commissioners. The
\nmanagement will not deal with the problem as it would disrupt our
\nconcentration on turning the company around. We want to do
\nbusiness here. That is why we are leaving it to the commissioners
\nto decide later on what action needs to be taken against the
\nprevious management.<\/p>\n
I have also overhauled the oversight and control mechanisms in
\nthe company to avoid any irregularities in the future.<\/p>\n
Are there any indications that the irregularities are the
\nresult of acts by previous managements to enrich themselves or
\ntheir cronies?<\/p>\n
I can only say that previous managements were guilty of
\nnegligence in respect of the irregular transactions that took
\nplace, some of which date back between five and eight years,
\nwithout any efforts to reach a settlement.<\/p>\n
What about the productivity of your employees?<\/p>\n
The work culture in this company is also a problem, with most
\nemployees displaying the typical mentality of civil servants.
\nWhen I first came here, people were shocked to have to come to
\nthe office before 8:30 a.m. as they usually came at 9 a.m. or
\neven 10:30 a.m., and spent more time on lunch than working.<\/p>\n
My plan is to gradually change the work culture by molding
\nthem to be more productive and accountable, like the employees of
\nforeign firms. I don't want to instill a work culture here like
\nthat in a factory, but at least the employees have got to be
\naccountable.<\/p>\n
Are there any new projects that you are eyeing at the moment?<\/p>\n
We are in the process of preparing investment instruments for
\ninfrastructure funds. We expect to be able to raise between $1
\nbillion and $1.5 billion from pension funds, state enterprises
\nand the investing public. The instruments will be available
\nstarting next year. However, we cannot disclose the details of
\nthe instruments yet.<\/p>\n
Another project we are working on now is on how to become a
\nrestructuring engine for state enterprises. We are planning to
\nbecome some kind of special research and analysis center for the
\ncompanies.<\/p>\n
No other financial institutions know as much about state firms
\nthan Danareksa.<\/p>\n
Is there any hope that Danareksa will make a profit this year?<\/p>\n
We are still going for it. But I think it will be hard. We
\nexpect the company will record a loss this year due to the
\nprovision we've made for NPLs. As for next year, we are
\noptimistic that we can make a profit.<\/p>\n
(In this year's first half, Danareksa recorded a loss of Rp
\n198.2 billion and an operating profit of Rp 123.7 billion).<\/p>",
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