Dealing with debtors<\/p>\n
The Cabinet finally moved to take a strong line against the
\ncountry's largest debtors, threatening to take resolute legal
\naction against uncooperative debtors within the next four months.
\nThis latest move automatically annuls the highly controversial
\ndecision taken by the ministerial Financial Sector Policy
\nCommittee earlier in December to extend their debt-settlement
\nagreements by six to 10 years and to offer them more lenient
\npayment terms.<\/p>\n
It is too early to judge whether the government now really has
\nthe political courage to deal firmly with the biggest, and most
\n\"powerful\", debtors, who still have many friends in high places.
\nBut we have good reason to be skeptical.<\/p>\n
In fact, given the demands it has repeatedly being making
\nsince 2000 for the debtors to meet the commitments they made in
\ntheir debt-settlement agreements and the earlier threats it made
\nto take criminal proceedings against recalcitrant debtors, the
\nnoises now emanating from the government bear an uncanny
\nresemblance to those produced by a broken record.<\/p>\n
That the Cabinet has yet to appoint legal council to review
\nthe debt-settlement agreements involving more than Rp 140
\ntrillion (US$14 billion) in debts owed by the former owners of
\nthose banks that were liquidated or nationalized is further
\nevidence that the government is not yet fully confident of its
\nlegal position vis-a-vis the bad debtors.<\/p>\n
The government made similar threats of strong legal action in
\nNovember, 2000, claiming that most of the 35 largest debtors had
\nbeen uncooperative and had failed to stand by the commitments
\nthey had made in their debt-settlement accords, and that several
\ndebtors had overstated the value of the assets they had pledged
\nto the government as collateral.<\/p>\n
The most troublesome of the debt-settlement pacts are the
\nMaster Shareholder Settlement and Acquisition Agreements (MSAA)
\nentered into with five debtors and involving more than Rp 88.6
\ntrillion. These were hastily drawn up in late 1998 by the then
\nHabibie government out of fear that longer delays might prompt
\nthe debtors to engage in asset stripping.<\/p>\n
However, the MSAAs contain a number of clauses that are
\ngreatly disadvantageous to the government. The agreements, for
\nexample, automatically discharge and acquit the debtors as
\nagainst any potential civil or criminal liability regarding
\nviolations of banking laws, notably the legal lending limits.<\/p>\n
Even more disadvantageous is the clause stipulating that any
\nshortfalls in the proceeds of asset sales conducted for the
\npurpose of repaying debts are the responsibility of the
\ngovernment, whereas any surpluses accruing from such sales
\nautomatically revert to the debtors. Strange too is the fact that
\nthe accords leave the management of the pledged assets entirely
\nin the hands of the debtors.<\/p>\n
And the government has since found that the value of most of
\nthe assets pledged has greatly eroded, lumbering the government
\nwith the onerous task of making up the difference. The problem,
\nhowever, is to adduce sufficient legally acceptable evidence to
\nprove that the depreciation in asset values was due to
\noccurrences or circumstances that were within the debtors'
\ncontrol.<\/p>\n
This is, we think, the last chance for the government to prove
\nthat it really has the courage to stand up to the bad debtors,
\notherwise it will lose whatever little credibility it still has
\nin the eyes of the public.<\/p>\n
The onus is now on legal council to establish evidence that is
\nadmissible in court of noncompliance on the part of the debtors.
\nThe council should be able to uncover enough evidence to prove
\nwhich of the debtors entered the agreements in bad faith, and
\nwhich of them were cooperative and honestly tried to meet their
\nobligations but failed to do so due to factors beyond their
\ncontrol.<\/p>\n
Only legally admissible evidence of noncompliance and bad
\nfaith will enable the government to declare the original debt-
\nsettlement accords to be null and void, bring uncooperative
\ndebtors to justice or lead to the signing of new agreements with
\ncooperative debtors that are fair to both parties. After all, it
\nis in the best interests of both the nation and the debtors if
\ntheir bad debts can be resolved satisfactorily at the least cost.<\/p>\n
Inadequate evidence, however, would lead to the government and
\nthe debtors becoming bogged down in protracted legal battles,
\nwhich could block the scheduled sales of pledged assets with a
\nconsequent highly damaging impact on the state budget and the
\nquality of the assets themselves.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/dealing-with-debtors-1447893297",
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"sponsor": "Okusi Associates",
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