Economists hail banking move<\/p>\n
JAKARTA (JP): Analysts and businessmen hailed the government's
\ndecision on Saturday to close down 38 insolvent private banks,
\ntake over seven more and recapitalize nine others, but reiterated
\nthat the success of the bank restructuring program lies in
\nsubsequent measures.<\/p>\n
They said the most daunting task for the government was to
\nbring down interest rates to solve the negative spread problems
\ncurrently burdening the local banks.<\/p>\n
Former Bank Indonesia director I Nyoman Moena and noted
\neconomist Sjahrir said existing banks, even healthy ones, could
\neasily go into the red if negative spreads continued.<\/p>\n
"Those banks could collapse and be closed down by the
\ngovernment again if negative spread prevails," Moena told The
\nJakarta Post on Saturday.<\/p>\n
Negative spread occurs when a bank's costs for managing funds
\nis higher than the interest rates charged on credits. Since the
\nmonetary crisis started in mid 1997, banks have been suffering
\nnegative spread as the government has tightly controlled the
\nmoney supply.<\/p>\n
Moena said the government should begin channeling credit
\nschemes such as trade financing and farm loans through the banks
\nto help reactivate the private sector as well as tackle the
\nnegative spread problems.<\/p>\n
Sjahrir, meanwhile, said the government could tackle the
\nlatter problems by reducing interest rates, backed up by a
\nprudent monetary policy.<\/p>\n
Sjahrir, speaking on behalf of the Indonesian Chamber of
\nCommerce and Industry's (Kadin) Institute of Economic Research,
\nStudy and Development, also called on the government to prevent
\nbanks affected by Saturday's decisions from laying off their
\nworkers.<\/p>\n
"Our social and political conditions cannot afford more
\nturbulence arising from white collar workers... especially while
\nwe are approaching the general election on June 7," Sjahrir said
\nin a statement.<\/p>\n
The government on Saturday closed 38 insolvent private banks
\nand nationalized seven larger ones. It also let 73 healthy
\ndomestic banks continue to operate.<\/p>\n
Bank Indonesia director Subardjo Joyosumarto revealed that the
\ncentral bank had allocated some Rp 50 trillion (US$5.5 billion)
\nin bridging funds to pay off depositors of the 38 closed banks.<\/p>\n
Subardjo also disclosed that recapitalization of the nine
\nbanks would cost Rp 21.3 trillion.<\/p>\n
Bank Internasional Indonesia would need Rp 7.6 trillion, Bank
\nLippo Rp 4.6 trillion, Bank Niaga Rp 3.7 trillion, Bank Universal
\nRp 2.4 trillion, Bank Bali 1.8 trillion, Bank Bukopin Rp 767
\nbillion, Bank Prima Express Rp 252 billion, Bank Arta Media Rp
\n150 billion and Bank Patriot Rp 3.2 billion.<\/p>\n
The government would provide up to 80 percent of the
\nrecapitalization funds to the nine banks by issuing bonds, while
\nthe owners must supply the remaining 20 percent by April 21.<\/p>\n
Economist Umar Juoro from the Center for Development and
\nInformation Studies called on the government and owners of the
\nnine participating banks to work together to woo foreign
\ninvestors.<\/p>\n
"The foreign investors may be more willing to consider
\ninvesting in the local banks because the criteria are clearer
\nnow, and the presence of these investors would also increase the
\ncountry's credibility," he told the Post.<\/p>\n
Umar said the criteria which the government's bank
\nrestructuring was based on were better and more transparent than
\npreviously. This would help efforts to restore the government's
\ncredibility and speed up economic recovery.<\/p>\n
He attributed this progress to the combined deal made among
\nthe government, the central bank, the Indonesian Bank
\nRestructuring Agency, the International Monetary Fund and the
\nWorld Bank.<\/p>\n
Umar and his fellow economists, however, agreed that the
\ncrucial part of the bank restructuring program was in carrying
\nout the next moves.<\/p>\n
Other economists, however, regretted the fact that the
\ngovernment did not publicize the business plans, the "fit-and-
\nproper" qualities of the nine banks which have entered the
\nrecapitalization process and the names of the errant bankers.<\/p>\n
Sri Mulyani Indrawati, an economist at the University of
\nIndonesia, said the government had to present the public with the
\nclearest picture of each of the surviving banks.<\/p>\n
"The public has the right to know specific conditions of the
\nbanks, including their owners and management, which will be
\nrecapitalized with state money," she was quoted by Antara as
\nsaying.<\/p>\n
Bank analyst Laksamana Sukardi agreed and said the government
\nmust explain the reasons why certain banks were taken over by the
\ngovernment or allowed to operate without recapitalization while
\nsome others were closed down.<\/p>\n
Such an explanation was necessary to quell the spreading
\nrumors that the government is protecting certain businessmen with
\nstrong political connections.<\/p>\n
"Such negative rumors will eventually destroy people's
\nconfidence in the banking system. The bank needs such confidence
\nto survive and develop," he said.<\/p>\n
Bad bankers<\/p>\n
Laksamana also urged the government to announce the names of
\nerrant bankers who had abused Bank Indonesia liquidity facilities
\nfor their banks in order to promote their own business interests.<\/p>\n
"But this must be done carefully because not all owners of the
\nclosed banks use such liquidity credits," he said.<\/p>\n
The government initially planned to announce the names of
\nmiscreant bankers and creditors, but later backed off due to
\nlegal considerations.<\/p>\n
Kadin chairman Aburizal Bakrie, whose Bank Nusa Nasional was
\nnationalized, said he accepted the decision and urged the
\ngovernment to use the banks it had taken over or would
\nrecapitalize to take care of the real sector, especially the
\nsmall and medium-scale businesses.<\/p>\n
"Without the banks' help, it would be very hard for businesses
\nnow to survive the crisis."<\/p>\n
Businessman Fadel Muhammad, whose Bank Intan was closed down
\non Saturday, said he "fully accepted the decision," after his
\nproposal to turn the bank into an Islamic-based syaria bank, with
\nthe help of Oman's Shanfari Group, was turned down by the IMF.<\/p>\n
Fadel also called on the government to look after small and
\nmedium-scale businesses.<\/p>\n
Meanwhile, chairman of the Indonesian Footwear Manufacturers'
\nassociation Anton Supit expressed concerns over the impact of the
\nclosures on the activities of companies affiliated to the banks.<\/p>\n
"The financial activities of companies that rely on the banks
\nor put their funds in them will be disrupted temporarily, unless
\nthe government takes immediate measure," he said. (das\/rei\/rid)<\/p>",
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