Economists urge transparency in recapitalization<\/p>\n
JAKARTA (JP): Economists defended the disputed
\nrecapitalization program on Thursday, but urged the government to
\nbe transparent in the selection of participating banks to prevent
\na public outcry and suspicion over its credibility.<\/p>\n
Transparency is vital for the government to gain support for
\nthe costly scheme to keep afloat the country's beleaguered banks,
\nthey said.<\/p>\n
"The criteria of banks that could be recapitalized should be
\nclear and announced publicly," University of Indonesia economist
\nAnwar Nasution said at the commencement of the Indonesian
\nManagement Institute.<\/p>\n
He was referring to the controversy provoked by President B.J.
\nHabibie's Jan. 18 decree, which stipulates Rp 3.75 trillion
\n(US$431.03 million) in capital will be allocated private Lippo
\nBank and Rp 18.46 billion to Bank Sembada Artanugroho (Sanho).<\/p>\n
Ten regional development banks owned by provincial
\nadministrations will be recapitalized at the same time.<\/p>\n
The decision drew criticism because of an alleged lack of
\ntransparency in the selection process. Especially galling to many
\nwas that the lion's share of funding went to Lippo, owned by the
\npolitically well-connected Riady family.<\/p>\n
Anwar was not disturbed by the amount earmarked for Lippo.<\/p>\n
"In my opinion, Mochtar Riady is one of our best bankers. He
\nis better than the key staff of state-owned banks."<\/p>\n
He queried the motives of critics of the decision, saying the
\nissue was "politicized" to curry public support.<\/p>\n
"Legislators, especially, have started to adopt a populist
\nattitude: 'why is the money going to Mochtar Riady instead of
\nsome satay vendor from Madura?' This populist attitude will
\ndestroy the order of our economy."<\/p>\n
Bank analysts Rijanto and I Nyoman Moena agreed the
\ncontroversy over Lippo and Sanho was triggered by the
\ngovernment's failure to clarify the issue.<\/p>\n
They also regretted that the decree listing the first batch of
\nthe program's participants was issued before the draft state
\nbudget was deliberated by the House of Representatives.<\/p>\n
The government estimates it will need Rp 300 trillion to
\nrecapitalize about 80 private and state banks.<\/p>\n
It will issue bonds to provide 80 percent of the funds, and
\nthe interest payment will be drawn from the state budget. The
\nbanks will provide the remaining 20 percent.<\/p>\n
Moena was concerned the controversy would make it more
\ndifficult for banks to participate in the recapitalization
\nprogram, even those already eligible.<\/p>\n
"Are we going to let a bank become a victim because of the
\ngovernment's failure to be transparent?" he said.<\/p>\n
Rijanto said failure to clarify the issue would prove a
\nstumbling block to other banks prepared to inject the 20 percent
\nof recapitalization funding and submit a required "business
\nplan".<\/p>\n
"If a bank already submitted a business plan and is willing to
\ninject the required 20 percent of fresh funds, are they going to
\nhave to wait until the matter on the bonds issuance becomes
\nclear?"<\/p>\n
The Indonesian Prosperous Labor Union is demanding the
\ngovernment announce publicly the results of due diligence of
\nlocal banks.<\/p>\n
It also said the recapitalization program should not start
\nuntil the government issues the decree on the bonds, which would
\nrequire approval from the House of Representatives.<\/p>\n
The International Monetary Fund director for the Asia Pacific,
\nHubert Neiss, said on Wednesday night that the recapitalization
\nprogram could only be implemented after the House stamped its
\napproval on the bond issuance.<\/p>\n
"The government has to issue bonds and the interest payments
\nwould be taken out of the state budget, which must get the
\napproval of the House," Neiss was quoted by Antara as saying.<\/p>\n
Anwar stressed that the recapitalization program was a crucial
\nstep toward recovery because it could bring down bank interest
\nrates and loosen the credit crunch. (das)<\/p>",
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