RI to opt for Mexican model in debt crisis<\/p>\n
JAKARTA (JP): Indonesia is to adopt a revised version of the
\nMexican model to solve its private sector overseas debt crisis,
\nState Minister of the Empowerment of State Enterprises Tanri
\nAbeng said yesterday.<\/p>\n
This would likely include a grace period of a few years and
\nprovide an affordable exchange rate for the rupiah against the
\nU.S. dollar, he added.<\/p>\n
\"We are likely to go for the Mexican model, but certain things
\nneed to be adjusted to our conditions and needs,\" he told
\nreporters yesterday following a meeting between the country's
\ndebt settlement team and experts from Japan.<\/p>\n
He didn't give further details as the model is still being
\nrefined, including through further discussions with the
\nInternational Monetary Fund (IMF).<\/p>\n
The revision was needed because there were differences between
\nthe problems in Indonesia and Mexico, he pointed out.<\/p>\n
The rupiah has been under severe pressure since July, plunging
\nto its lowest level of Rp 17,000 to the U.S. dollar in January,
\ncompared to Rp 2,450 in the precrisis period in July. It is
\ncurrently trading at about the 8,500 level.<\/p>\n
This has caused most indebted companies to become technically
\nbankrupt as their foreign debts surpass their equity. Mexico
\nexperienced a similar problem in 1984, Tanri said.<\/p>\n
He explained the aim of the model was not just to lessen
\ndemand for dollars and thus shore up the ailing rupiah but also
\nto help the private sector resume business to absorb
\nunemployment.<\/p>\n
\"I think the Mexican model is workable,\" he said.<\/p>\n
Japan has already proposed a similar model, but supported with
\nbetween $10 billion and $15 billion in cash.<\/p>\n
\"But it's a short-term loan. This can be used for other
\npurposes,\" Tanri said.<\/p>\n
He stressed, however, that for the model to be workable it was
\ncritical to have enough credible information about the debt-
\nridden companies and in particular their foreign debt structure.<\/p>\n
He pointed out, for example, that even if the government
\nmanaged to stabilize the rupiah at a certain level, some
\ncompanies might still not have enough liquidity to service their
\ndebts.<\/p>\n
Grace period<\/p>\n
The information would also be needed to decide the length of
\nthe grace period, he added.<\/p>\n
Data reporting would be a \"compulsory requirement,\" he said,
\nadding that there would be incentives to encourage such
\nreporting. He declined to provide details.<\/p>\n
Tanri said that the IMF had given the green light for the
\ngovernment to take initiatives to acquire the needed information.<\/p>\n
According to the minister, of the 800 indebted companies only
\n180 had made such reports as the previous debt-solving scenario
\nwas based on a voluntary approach.<\/p>\n
In January the government formed an informal debt settlement
\nteam headed by former economic minister Radius Prawiro, which
\npromoted a voluntary renegotiation between a contact committee of
\ndebtors and a steering committee of lenders.<\/p>\n
Radius announced in February that Indonesia's private sector
\noverseas debts totaled more than $68 billion.<\/p>\n
Tanri, however, stressed that although the government would
\ntake a more active role, it would maintain its non-bailout stance
\nin dealing with the corporate debt crisis.<\/p>\n
\"The government will not take any credit risk,\" said Tanri,
\nwho is also a member of the economic and monetary resilience team
\nheaded by President Soeharto. (08)<\/p>",
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"sponsor": "Okusi Associates",
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