IBRA faces tough challenges in meeting target<\/p>\n
JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
\nadmitted that the challenges ahead would be "incredibly huge" in
\nmeeting its 2001 target.<\/p>\n
IBRA deputy chairman Slamet Sumantri said that the agency
\nwould find it difficult to obtain a good price for its banking
\nassets because of competition from other similar agencies in
\nneighboring countries.<\/p>\n
"The challenges ahead are incredibly huge ... It's a buyers'
\nmarket where buyers tend to dictate prices," Slamet told a press
\ngathering late last week.<\/p>\n
"IBRA is competing with other agencies in the region," he
\nadded.<\/p>\n
He also said that legal certainty and stable security
\nconditions -- which are currently lacking in Indonesia -- were
\namong the crucial factors that would attract foreign investors to
\npurchase local assets.<\/p>\n
IBRA is targeted to raise some Rp 27 trillion (US$2.84
\nbillion) in cash to help finance the 2001 state budget deficit
\nestimated at 3.7 percent of gross domestic product.<\/p>\n
Last year, the agency was targeted to raise Rp 18.9 trillion,
\nbut it managed to raise Rp 20.7 trillion.<\/p>\n
The agency plans to raise cash by selling its various banking
\nassets and recovering the huge non-performing loans (NPLs) under
\nits management.<\/p>\n
"The IBRA (2001) target is actually much higher than that ...
\nit's almost double last year's target," Slamet said, pointing out
\nthat in addition to the Rp 27 trillion cash target, the agency
\nwould also have to swap approximately Rp 10 trillion worth of
\ngovernment bank recapitalization bonds for loans which have been
\nrestructured by IBRA.<\/p>\n
The government has issued around Rp 430 trillion worth of
\nbonds to help finance the country's bank recapitalization
\nprogram. The state budget covers the interest on the government
\nbonds, which for the term of the 2001 budget is forecast at Rp 55
\ntrillion.<\/p>\n
In a bid to ease down the pressure on the budget, part of the
\nbonds would be retired by swapping them for the IBRA-restructured
\nloans.<\/p>\n
IBRA manages around Rp 260 trillion worth of non-performing
\nloans (NPLs), transferred by ailing and closed banks in 1998 and
\n1999 when the country's financial crisis was at its peak. The
\nagency is mandated to restructure and recover the loans.<\/p>\n
But Slamet said that the current rising trend in domestic
\ninterest rates might become a threat to the restructuring of the
\nNPLs.<\/p>\n
"The 0.5 percent cut in the U.S. (Federal Reserve) interest
\nrate hopefully can also trigger lower domestic interest rates so
\nthat debtors can repay their debts," he said.<\/p>\n
The benchmark interest rate of Bank Indonesia SBI promissory
\nnotes has continued to increase over the past months, and
\ncurrently is hovering at around 14.7 percent.<\/p>\n
Slamet added that the restructuring process of the NPLs was
\nalso "sensitive" to the exchange rate of the rupiah.<\/p>\n
The rupiah has been under strong pressure over the past
\nseveral months, ending at Rp 9,575 per U.S. dollar late last
\nyear, which was a drop of around 27 percent from the level in
\nearly 2000.<\/p>\n
Experts have said that the unstable exchange rate created
\ndifficulties in reaching debt restructuring agreements.<\/p>\n
In addition to the NPLs, IBRA has also received hundreds of
\ntrillions of rupiah worth of fixed assets, including those
\nsurrendered by former bank owners to repay their debts to the
\ngovernment.<\/p>\n
The agency must continue to dispose of these assets until
\n2004, when its mandate is expected to be fully completed.<\/p>\n
IBRA has also nationalized four large private banks, and
\nhelped recapitalize seven private banks. The agency owns more
\nthan 90 percent of the nationalized banks, and between 50-80
\npercent of the recapitalized banks.<\/p>\n
IBRA, a unit of the finance ministry, must gradually divest
\nits ownership in the above banks.<\/p>\n
Last year, it sold a 22.5 percent stake in the nationalized
\nBank Central Asia (BCA) through an initial public offering
\nmechanism, and in the first semester of this year it plans to
\nsell more shares in BCA so that the government will no longer be
\nthe single majority owner.<\/p>\n
The agency also plans to sell at least a 51 percent stake in
\nthe nationalized Bank Niaga in the first semester of this year.<\/p>\n
"The target is to sell the government's majority stakes in the
\ntwo banks. But if the market conditions are good, we will sell
\nmore shares," said IBRA deputy chairman Jerry Ng, who is
\nresponsible for bank restructuring at the agency.<\/p>\n
IBRA was supposed to sell the BCA and Bank Niaga stakes late
\nlast year, but the sale was delayed due to poor market
\nconditions. The delay had irked the International Monetary Fund.<\/p>\n
Slamet said that the agency plans to raise around Rp 3.6
\ntrillion this year from the sale of the publicly-listed Bank
\nNiaga and BCA.<\/p>\n
He said that loan recovery was expected to contribute around
\nRp 12.2 trillion to the Rp 27 trillion cash target, while the
\ndisposal of stakes in various companies was expected to
\ncontribute Rp 9.9 trillion. (rei)<\/p>",
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