Govt scraps IBRA's debt extension plan<\/p>\n
Berni K. Moestafa and
\nFebiola Desy Unidjaja
\nThe Jakarta Post
\nJakarta<\/p>\n
The government has scrapped the Indonesian Bank Restructuring
\nAgency's (IBRA) controversial debt extension plan, and has
\ninstead slapped a three month deadline on bad debtors to repay
\ntheir debts.<\/p>\n
\"We basically went back to the deal they (the debtors) agreed
\nto in 1998, but made additional provision for law enforcement,\"
\nCoordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti
\ntold reporters after Thursday's Cabinet meeting.<\/p>\n
The decision ended a nearly two-month review on the debt
\nextension plan, which critics said favored indebted conglomerates
\nat the public's expense.<\/p>\n
In 1998, the conglomerates agreed to repay some $13 billion in
\nstate-funded emergency loans to their banks, that they had
\nmisused.<\/p>\n
This was on top of some $43 billion in recapitalization bonds
\nthat the banks received, and on which the state budget continues
\nto pay out $5 billion a year in interest.<\/p>\n
But even though about $60 billion was spent on bailing out the
\nbanks, most owners have yet to start repaying the $13 billion
\nthat they have admitted misusing.<\/p>\n
Their debt settlement agreements with the Indonesian Bank
\nRestructuring Agency (IBRA) expire this year.<\/p>\n
Within 30 days starting on Thursday, Dorodjatun said, legal
\ncounsel would evaluate the compliance of all debtors.<\/p>\n
The outcome would be a list of cooperative and uncooperative
\ndebtors. The latter, upon receiving notification from state legal
\ncounsel, would have three months to settle their obligations.<\/p>\n
\"Legal action may include, but not be limited to, asset
\nsequestration, criminal charges of corruption, jail, and travel
\nbans,\" Dorodjatun said.<\/p>\n
He was unable to explain how all this would be brought about.<\/p>\n
Previous attempts to rein in errant bad debtors through legal
\nmeans have proved futile. IBRA lost nearly all of the cases it
\nbrought to court.<\/p>\n
Coordinating Minister for Security Affairs Susilo Bambang
\nYudhoyono admitted that debtors had taken advantage of legal
\nloopholes, and said the government would have to \"remove those
\nloopholes.\"<\/p>\n
Asked how this would be achieved, he said there was as yet no
\naction plan. \"We're building our plan on a case by case basis.\"<\/p>\n
The country's infamous legal system has become one of the main
\nreform targets of international donors like the World Bank and
\nthe International Monetary Fund (IMF).<\/p>\n
But progress, if any, has been slow. With the government
\nlacking the political will to purge corruption among judges, the
\ncourt room has turned out to be the preferred battleground for
\nthe conglomerates.<\/p>\n
This has been compounded by IBRA's weak legal position under
\nthe 1998 debt settlement deals it signed with the conglomerates.<\/p>\n
One independent legal review of the Salim Group's Master of
\nSettlement and Acquisition Agreement (MSAA) described the deal as
\nunreasonable, unfair and void.<\/p>\n
IBRA officials said the MSAA prevented effective prosecution,
\nas debtors could only be classified as uncooperative at the end
\nof the four year deal.<\/p>\n
Under the MSAA, debtors are supposed to repay their debts by
\nhanding over assets of equal value to IBRA.<\/p>\n
But the scheme, designed with the help of foreign consultants,
\nprevents IBRA from securing more assets from debtors should the
\npledged assets decline in value.<\/p>\n
This has resulted in the low recovery rate of about 20 percent
\nthat IBRA realized from the sale of Salim assets valued at Rp 52
\ntrillion in 1998.<\/p>\n
Five conglomerates agreed to settlement deals worth some Rp 88
\ntrillion under the MSAA scheme. But IBRA said that only the Salim
\nGroup had complied with its MSAA.<\/p>\n
The government has now decided to stick to the original deals
\nwithout incorporating a debt restructuring scheme, dashing hopes
\nof improving IBRA's recovery rate.<\/p>\n
\"Justice is expensive,\" said State Minister for State
\nEnterprises Laksamana Sukardi in response to a question as to
\nwhether the government had compromised the recovery rate to
\nassuage the public clamor that bad debtors would be brought to
\njustice.<\/p>\n
The question of priorities is one that has been dividing the
\ngovernment since IBRA first proposed the debt extension plan last
\nDecember.<\/p>\n
IBRA chief I Putu Ary Suta was reportedly complaining about
\nhow he was supposed to recover the money when Thursday's Cabinet
\nmeeting decided to drop his debt extension plan.<\/p>\n
Elsewhere, Reuters has reported that the IMF welcomed the
\ndecision, calling it an encouraging move in the direction of
\nproviding better legal certainty.<\/p>\n
Editorial -- Page 4
\n Analysts -- Page 11<\/p>",
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