Dealing with big debtors<\/p>\n
Corruption, collusion and weak law enforcement are central to
\nthe hugely controversial way in which the government has been
\ndealing with former bank shareholders who signed agreements in
\n1998 to settle over Rp 141 trillion (US$15.6 billion) in debts to
\nthe state.<\/p>\n
Even though almost all the shareholder settlement agreements
\nare already in default and the value of the assets they ceded
\nturned out to be way below their debts, almost none of them has
\nbeen brought to justice.<\/p>\n
Further insulting the public's sense of justice are the
\nallegations by several businesspeople that many of these
\nrecalcitrant debtors, who had robbed their own banks and state
\nbanks through collusive borrowing, have succeeded in acquiring
\ntheir former assets at throw-away prices with new loans from
\nstate banks.<\/p>\n
Rubbing yet more salt into the wound is the government
\nannouncement, after a Cabinet meeting on Monday, that two former
\nbank shareholders have been acquitted of all criminal charges
\nrelated to violations of connected-party lending limits and
\nseventeen others could obtain similar discharge after settling
\ntheir debts.<\/p>\n
How could these tycoons, who were found by the Supreme Audit
\nAgency to have misused a large portion of the liquidity credits
\nin currency speculation, get such favorable treatment?<\/p>\n
The problem dates back to 1998 when the B.J. Habibie
\nadministration, afraid that the debtors might strip their assets,
\nhurriedly concluded agreements with the owners of closed and
\nnationalized banks to settle Rp 141 trillion in emergency
\nliquidity credits they received from the central bank during the
\nheight of the banking crisis. Under the settlement agreements
\nthey surrendered assets supposed to be equal in value to their
\nliabilities.<\/p>\n
Even though the agreements were processed by high-caliber,
\ndomestic and international lawyers and consultants under the
\nsupervision of the International Monetary Fund, the deals turned
\nout to be greatly in favor of the debtors as the assets they
\nceded were not subjected to independent financial due diligence.<\/p>\n
Worse still, the government trapped itself with a clause in
\neach of the agreements that automatically releases and discharges
\nthe former bank shareholders of all criminal charges related to
\ntheir violations of legal lending limits.<\/p>\n
A legal advisory team assigned by the government in March to
\nreview the shareholder debt-settlement agreements recommended in
\nJuly that the agreements could be declared null and void as the
\ndebtors were proved to have signed the deals in bad faith.<\/p>\n
The government is, however, faced with a dilemma. Bringing the
\ndebtors to court would jeopardize the legal status of their
\nassets that had been sold by the Indonesian Bank Restructuring
\nAgency (IBRA) to new investors and this, in turn, could sabotage
\nthe whole asset recovery process.<\/p>\n
Moreover, even though IBRA is vested with quasi-judicial
\npowers that confer the authority of court orders on its legal
\nactions, this agency seems to have been rendered impotent to
\nexercise its legal authority, as most of its decisions or legal
\nclaims have been rejected by either notoriously corrupt or
\nincompetent judges, who are not familiar with complex corporate
\ntransactions.<\/p>\n
Given this dilemma, out-of-court settlement seems to be the
\nmost realistic way of enforcing most of the debt-settlement
\nagreements to achieve optimal debt collection while maintaining
\nthe sanctity of contracts the government has signed. The greatest
\nchallenge though is to ensure that this policy fully meets the
\npublic's sense of economic justice and effectively forces the
\nformer bank owners to repay their debts.<\/p>\n
The public's sense of justice would be served only if the debt
\nsettlements were transparent and credible, in that the government
\ncould collect as much debt as possible without having to drop
\nlegal enforcement against corruption and collusion.<\/p>\n
The government should come out with detailed explanations
\nabout each deal it will conclude with the debtors. Its assessment
\nof each debtor should be highly accountable, providing credible
\narguments to justify the deal it will finally conclude with each
\nof the former bank owners.<\/p>\n
Most important is that this policy should not rule out the
\noption of bringing uncooperative debtors to court. Jailing two or
\nthree tycoons would be a deterrent to similar corporate fraud in
\nthe future. After all, corrupt businesspeople who colluded with
\nsenior government officials have been partly responsible for the
\neconomic ruin the nation now faces.<\/p>\n
However, out-of-court debt settlement that is too much in
\nfavor of the debtors would only plant a time bomb that could
\ndetonate another economic crisis in the future.<\/p>\n
Yet more damaging is that a settlement that failed to meet the
\npublic's sense of justice would burden tycoons with the heavy
\nbaggage of negative public perception, which would create a
\nhostile social environment for the future development of big
\nbusiness in the country.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/dealing-with-big-debtors-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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