All construction firms are bankrupt

JAKARTA (JP): Every one of the country's construction companies would be forced to declare bankruptcy if a newly introduced bankruptcy law is strictly implemented, a senior figure in the construction industry has said.

The chairman of the Indonesian Builders Association (Gapensi), Agus G. Kartasasmita, said yesterday that the economic crisis had forced almost all of the association's 41,705 members to the brink of collapse.

"Viewed from their capital and debt structure, all Indonesian builders have become bankrupt, especially if based on the bankruptcy law," he told the Antara news agency.

Should construction companies be brought to commercial court by their creditors, no single firm would be able to survive because they are unable to repay their mounting debts, he said.

The recent introduction of the bankruptcy law was, therefore, a real threat to the industry and Agus called on the government to delay its implementation.

The government introduced the new law last week to replace what many critics had said was a relic of the Dutch colonial administration dating to 1905. The move was part of the agreement signed with the International Monetary Fund (IMF) in exchange for a financial bailout.

The new law also stipulates that commercial courts must complete bankruptcy cases within 30 days of the filing date. A further 30 days are given for an appeal process.

Companies taken to court by their creditors are allowed to suspend their payments for a 270-day period, during which they can work with receivers to restructure the debt, including full or partial repayment schemes.

To resolve the industry's debt problem, Agus suggested the government create a special debt-restructuring institution, like the Indonesian Debt Restructuring Agency (INDRA), to help construction companies resolve their mounting debts.

The government set up INDRA early this year to help the country's private sector with its foreign debt problems.

"I think we need another debt restructuring institution like INDRA to help us solve our debt problem," he said.

The country's builders are currently facing severe difficulties due to a sharp decline in government projects, which had been the lifeblood of the industry in the past.

A severe drop in the number of private projects came as a second blow to the industry once the economic crisis ripped into the ability of private property companies to finance planned developments. (aly)