IBRA's asset sales<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA), hard-pressed
\nto raise at least US$5.1 billion (Rp 36 trillion) by December for
\nthe state budget, has of late been flaunting its asset disposal
\nplans covering equities in going companies, bad loans and
\nproperties spread throughout the country. This is all part of
\nabout Rp 600 trillion (book value) worth of assets taken over by
\nthe agency from state banks and closed, nationalized and
\nrecapitalized banks.<\/p>\n
The agency announced detailed plans to sell within this year
\nequities in at least 20 companies, including Bank Central Asia
\n(BCA), and a good portion of 1,105 properties, or bank offices,
\nand some of the Rp 220 trillion worth of bad loans it now
\nmanages.<\/p>\n
The plans, which appear well-prepared, do not, however,
\nimpress anyone who is familiar with the agency's shoddy deals
\nover the past year. In fact, IBRA may fall behind its target of
\nraising Rp 17 trillion in the current fiscal year ending later
\nthis month. The agency had collected only Rp 10.5 trillion as of
\nearly this month, and the only major source of possible revenue
\nuntil the end of the fiscal year is the sale of its 40 percent
\nequity in PT Astra International, which is expected to bring in
\nabout Rp 3 trillion.<\/p>\n
While South Korea and Thailand have been enjoying strong
\nrecovery due to the massive return of foreign direct investment,
\nmainly through asset acquisition, Indonesia remains mired in a
\nslump. South Korea, for example, has been working really hard to
\nput out the welcome mat for foreign investors. It got $15.5
\nbillion in foreign direct investment last year, or twice as much
\nas that in 1998, mainly through asset sales.<\/p>\n
As the rupiah exchange rate to the dollar is still more than
\n66 percent lower than it was at the beginning of the economic
\ncrisis in mid-1997, IBRA, which holds a huge amount of assets,
\nwas supposed to be a one-stop service for foreign investors. But
\ninstead of becoming a paradise for deals, IBRA has often been
\nseen as a labyrinth that confuses investors combing through the
\nrubble of assets in its holding.<\/p>\n
Standard Chartered Bank of Britain, the first foreign investor
\nseriously committed to acquiring a local bank, became so
\nfrustrated with the process of its deal with IBRA for equity
\ninvestment in Bank Bali that it abruptly quit the transaction
\nlast year. An American investor consortium led by Newbridge
\nCapital\/Global Equity also got burned in their bid to buy IBRA's
\n40 percent stake in Astra International in January. Though this
\nconsortium still joined the second round of bids, the bitter
\nexperience adversely affected IBRA's reputation in deal-making.<\/p>\n
IBRA announced last month another setback in its plan to sell
\nBCA, saying that the bank's initial public offering could not be
\nlaunched as scheduled in March due to technicalities.<\/p>\n
What makes things even more disappointing is that the reasons
\nbehind the thwarted deals were not the prices or sense of
\nnationalism, as many had feared, but IBRA's clumsiness in
\nidentifying, documenting and sorting out the bad loans and other
\nassets it now manages. One would understand that since IBRA was
\nset up during the peak of the crisis in January 1998, and served
\nas a dumping ground for ailing banks, the assets it took over
\nwere neither clearly identified nor properly documented. But
\nstill the whole process should not have taken more than a year to
\ncomplete.<\/p>\n
Because IBRA is one of the major sources of revenue for the
\nstate budget -- it is tasked to raise almost Rp 19 trillion
\nbetween April and December alone -- the agency should have placed
\ntop priority in sorting out and processing all the documents
\nrelated to the acquisition. Only then could it package the assets
\ninto easily saleable forms and adequately schedule their sales to
\nachieve maximum value.<\/p>\n
A proper documenting process will become even more imperative
\nnow as IBRA will soon begin selling the 1,105 properties and
\nsmaller sizes of bad loans it took over from closed banks.
\nSelling properties with incomplete legal titles and poorly
\ndocumented loans will not only lead the agency into a messy
\nlitigation process, but also scare away the few remaining
\ninvestors still interested in IBRA assets.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ibras-asset-sales-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}