House approves plan to sell majority stake in Danamon<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The House of Representatives approved on Tuesday plans to sell
\ngovernment shares in Bank Danamon in a decision that marks a
\nshift from legislators' previous slow acceptance of state asset
\nsales.<\/p>\n
\"We approve the government's proposal to divest at least 51
\npercent of Bank Danamon,\" said Commission IX deputy chairman
\nPaskah Suzzeta in a hearing with Minister of Finance Boediono,
\nState Minister of State Enterprises Laksamana Sukardi and the
\nIndonesian Bank Restructuring Agency (IBRA), which is in charge
\nof the sale.<\/p>\n
IBRA owns a 99.4 percent stake in the publicly listed Bank
\nDanamon after the government injected the bank with Rp 47
\ntrillion (about US$5.1 billion) worth of recapitalization bonds
\nin the wake of the 1997 economic crisis. The investing public
\nowns the remainder.<\/p>\n
Proceeds from the sale will be used to help cover the state
\nbudget's deficit this year.<\/p>\n
IBRA does not require the House's approval on state asset
\nsales, however, securing their support is seen as necessary to
\navoid a political backlash from selling national assets.<\/p>\n
The relative smooth agreement of Bank Danamon's sale contrasts
\nthe previous sales of Bank Niaga and Bank Central Asia (BCA),
\nwhen legislators objecting to the plan undermined one of the
\ncountry's crucial reform programs.<\/p>\n
As part of the International Monetary Fund's (IMF) reform
\nprogram, the sale of nationalized banks aims at revitalizing the
\nflagging banking sector with fresh capital and improved
\nmanagement.<\/p>\n
IBRA gained control over local banks after the government
\nspent about $60 billion on bonds to keep banks afloat following
\nthe 1997 economic crisis.<\/p>\n
Although the House backs the IMF-led reform program, selling
\nIBRA's shares in banks has been a sensitive issue because of the
\nmoney spent on saving these banks.<\/p>\n
Legislators demand high returns on the sales, arguing that
\nfive years after the crisis, IBRA's banks still depend on state-
\nfunded interest payments from the recapitalization bonds.<\/p>\n
Bank Danamon recapitalization bonds have meanwhile fallen to
\nRp 18.8 trillion with interest payments varying between Rp 1
\ntrillion to Rp 5 trillion over the next seven years.<\/p>\n
Bank Negara Indonesia (BNI) banking analyst Ryan Kiryanto said
\non Monday that recurring problems with legislators could hamper
\nIBRA's future bank sales.<\/p>\n
\"These problems should be dealt with first before launching
\nanother bank sale. The government and legislators need to settle
\ntheir differences internally,\" he said.<\/p>\n
Banking analyst Mirza Adityaswara agreed but added that both
\nsides should have learned by now how to proceed with bank sales
\nwithout stumbling over the same problems.<\/p>\n
IBRA should have launched Bank Danamon's sale last July and
\nfinalized it by next month, however, problems surrounding the
\nsale of Bank Niaga pushed back the schedule and officials said a
\ndeal was unlikely until early next year.<\/p>\n
Legislators also agreed to sell up to a 20 percent stake in
\nthe bank on the market first, before selling a larger 51 percent
\nstake to strategic investors later on.<\/p>\n
\"This will open the door to public involvement as widely as
\npossible,\" Paskah of the Golkar faction said.<\/p>\n
IBRA earlier explained that the initial sale was aimed at
\ntesting market interests while obtaining a benchmark price for
\nthe subsequent sale of a majority stake to strategic investors.<\/p>",
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