Foreign consultants' high fee questioned<\/p>\n
JAKARTA (JP): The House of Representatives raised an issue on
\nMonday about the high consultancy fee, particularly for foreign
\nconsultants, paid by the Indonesian Bank Restructuring Agency
\n(IBRA) to assist in restructuring the banking sector and
\nrecovering the massive amount of non-performing loans (NPLs).<\/p>\n
Ruling Golkar party legislator Thomas Suyatno asked about the
\nworthiness of the high fee, given the slow recovery of NPLs and
\nthe small proceeds from the sale of other assets under IBRA.<\/p>\n
IBRA chairman Glenn S. Yusuf told legislators that the agency
\nhad thus far paid Rp 650 billion (about US$92.85 million) in
\nstate budget funds for consultancy fees, of which Rp 400 billion
\nwent to foreign consultants. It also spent another $10 million in
\nloan funds from the World Bank for such fees.<\/p>\n
\"The cost is reasonable,\" Glenn said, citing the complex task
\nof conducting legal and financial due diligence audit on the
\ncountry's banking sector, and managing and recovering some Rp 600
\ntrillion in various assets.<\/p>\n
He added the consultancy fee only represents 0.1 percent of
\nthe total assets managed by the agency.<\/p>\n
\"We don't mind the high fee, but the question is whether the
\nlow output is commensurate with such a high compensation,\" Thomas
\ncontended during a meeting between IBRA and the House's
\nCommission VIII for finance, banking and state budget.<\/p>\n
Legislator Oke Supit agreed, saying that IBRA needed to speed
\nup the recovery of NPLs to help reduce the overall cost of the
\nbank restructuring program.<\/p>\n
\"Despite the high consultancy cost, IBRA has so far only
\nmanaged to raise a small sum of revenues from the assets under
\nits management,\" Supit said.<\/p>\n
IBRA has hired two foreign major consultants, JP Morgan Co.
\nand Lehman Brothers Inc., in addition to local consultancy firms
\nPT Danareksa and PT Bahana.<\/p>\n
Glenn said the foreign consultants were also needed to gain
\ncredibility for the bank and the NPLs restructuring programs.<\/p>\n
IBRA currently controls some Rp 600 trillion in various assets
\nincluding Rp 230 trillion in bank NPLs, Rp 96 trillion in fixed
\nassets pledged by the country's business tycoons to repay debts
\nowed to the government and hundreds of trillions of investment
\nspending in domestic banks.<\/p>\n
IBRA has a mission to raise Rp 17 trillion in cash for the
\ncurrent 1999\/2000 fiscal year ending in March to help finance the
\nRp 34 trillion in interest costs of the government bonds issued
\nfor recapitalizing the country's banking sector. The government
\nis expected to issue over Rp 351 trillion in bonds to finance
\nbetween 80 percent to 100 percent of bank recapitalization costs.<\/p>\n
IBRA deputy chairman Eko S. Budianto said the agency had so
\nfar managed to raise Rp 1.4 trillion in cash, mostly from the
\nrecovery of small bank loans.<\/p>\n
All of the NPLs of major banks, including the seven state
\nbanks, as well as all types of loans from closed banks were
\ntransferred to IBRA.<\/p>\n
Glenn was optimistic the agency could raise the targeted
\namount of revenue, particularly in view of the improving economic
\nand political condition of the country.<\/p>\n
He said the agency's priority was to sell the liquid assets
\npledged by the conglomerates, who were former owners of ailing
\nbanks, through the stock market.<\/p>\n
\"But we won't be engaged in a fire sale,\" he added.<\/p>\n
IBRA now holds shares in many companies listed on the domestic
\nand foreign stock exchanges. The agency, for instance, has 40
\npercent interest in giant automaker PT Astra International.<\/p>\n
He said the sale of liquid assets should not cause price
\npressure in the local stock market and must not worry existing
\nshareholders, particularly those in joint venture companies.<\/p>\n
\"Although we prefer divestment through the stock market to get
\na diverse investor base, we also consider the interest of foreign
\nshareholders in joint venture firms,\" he said, arguing that the
\nentry of new shareholders may affect the operation of the
\ncompany.<\/p>\n
In addition to liquid assets, the agency is also in control of
\nfixed assets used to back the NPLs.<\/p>\n
Glenn added that the agency was planning to merge prospective
\nnon-listed companies to gain a global scale for overseas listing,
\nor merge non-listed companies with listed operations.<\/p>\n
\"This includes companies in agribusiness, export, distribution
\nand hotel industries,\" he said.<\/p>\n
\"We will find specific fund managers who may be interested in
\nthese groups of companies,\" he added.<\/p>\n
\"Only 30 percent of the Rp 230 trillion in NPLs can be
\nrecovered if we resort to asset liquidation strategy,\" Eko said.<\/p>\n
IBRA is currently focusing on recovering the NPLs owed by the
\ncountry's 200 largest debtors. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/foreign-consultants-high-fee-questioned-1447893297",
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"sponsor": "Okusi Associates",
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