Rumors on bad debtors<\/p>\n
We were encouraged by the central bank's (Bank Indonesia)
\nannouncement last April that it was conducting special
\nexaminations of problem banks and of companies suspected of being
\nin trouble with servicing their debts. We welcomed the special
\nauditing as quite an essential measure to ascertain the exact
\nsize of non-performing assets at state banks and to accurately
\ndiagnose the problems behind the bad credits. The central bank's
\nmove left us assured that the potential damage from the spate of
\nbad loans would be contained.<\/p>\n
However, recent developments are causing us the great concern
\nthat the problems of non-performing assets at state banks have
\nnot been brought under control. Instead, rumors are flying that
\nseveral major bad loans will soon be exploding into public view.<\/p>\n
A case in point is the recent disclosure of the estimated Rp
\n500 billion (US$229 million) in bad debts owed by Robby
\nTjahjadi's Kanindo Group to two state banks -- the Development
\nBank of Indonesia (Bapindo) and Bank Bumi Daya. We had reckoned
\nthat the Kanindo Group would be included among the corporate
\ndebtors under special examination by the central bank, especially
\nbecause the ex-convict Robby had been publicly charged with
\nhaving defaulted on his debts by a member of the House of
\nRepresentatives in February.<\/p>\n
But as recent developments have shown, the central bank and
\nthe monetary authority seem to have been caught off guard by
\nKanindo's liquidity crisis. That raises the question as to how
\nthe central bank's examiners could not have foreseen Robby's
\nfinancial problems early this year. The question becomes even
\nmore puzzling because the list of suspected bad debtors that
\ncirculated as early as the middle of last year included Robby and
\nhis business group.<\/p>\n
The Kanindo case is causing us major apprehension due to the
\nfact that the central bank's special examinations of the 50
\nlargest borrowers from state banks seemed unable to clear away
\nthe questions about problem loans. That is discouraging because
\nthe special auditing work was originally expected to help the
\nmonetary authority to prepare rescue operations.<\/p>\n
We don't expect an easy and immediate solution to any of this.
\nBut the central bank should have prepared adequate measures to
\ncontain the damage from bad loans and to prevent doubtful credit
\nfrom degenerating into bad debts.<\/p>\n
Our apprehension should not, however, be mistaken for distrust
\nin the technical competence of the central bank's auditors.
\nInstead, our concern is related more to the non-technical
\nbarriers the auditors might have encountered in exercising their
\nsound, professional judgment with regard to the findings of their
\nauditing work. As the US$620 million loan scandal of Eddy
\nTansil's Golden Key Group has shown, \"political power games\"
\nrather than the technical incompetence of bankers can make credit
\nfraud possible.<\/p>\n
We get the impression that the credit fraud of both the Golden
\nKey and Kanindo groups was publicly disclosed only after their
\nowners ran out of luck in the sense that they apparently fell out
\nof favor with their political connections.<\/p>\n
The question now is who will be next among the big corporate
\ndebtors to lose the protection of their politically-well
\nconnected associates and, therefore, become vulnerable to having
\ntheir bad debts exposed to the public.<\/p>\n
An indication of who this may be has already emerged. New
\nrumors began circulating early this week that another textile
\ngroup, PT Detta Marina, allegedly obtained hundreds of billions
\nof rupiah in credit from Bapindo on the basis of bogus export
\ndocuments. It so happens that this same business group was
\nreported in the latter part of the 1980s to be in default on its
\ndebts to Bapindo. But as in the case of the House member's
\ndisclosure of Robby's bad debts last February, the issue of Detta
\nMarina's alleged bad debts in the 1980s soon died down due to
\nunclear reasons.<\/p>\n
This uncertainty about the overall solution to the problem of
\nbad debts provides fertile ground for all kinds of wild rumors.
\nThat will not help the efforts to restore the public's trust in
\nthe banking industry and in the monetary authority's capability
\nto cope with the huge sums of bad loans. And such uncertainty may
\nalso be exploited by irresponsible parties to wipe out their
\nmarket competitors.<\/p>\n
It is, therefore, more imperative now than ever before for the
\nmonetary authority to clear away once and for all the questions
\nsurrounding the big corporate debtors. Using the clause on
\nbanking secrecy to keep the problem from public scrutiny could
\neasily be seen simply as an attempt to protect politically-well
\nconnected borrowers.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rumors-on-bad-debtors-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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