Another shakeup at IBRA

Another shakeup at IBRA

There must have been something fundamentally amiss in the way
the government oversees the Indonesian Bank Restructuring Agency
(IBRA) that has prompted so many shakeups in the agency's top
management within less than three years of its operations. The
agency that will only be three years old later this month had its
chairman replaced for the fifth time last November. Earlier in
October, its senior deputy chairman was fired for unknown reason
while he was overseas on a roadshow to promote the sales of
assets to foreign investors.

Then it was confirmed on Monday that two of its five deputy
chairmen have tendered their resignations for personal reasons.
The damage incurred by such a move is not limited only to the
loss of the quitting officials but also adversely affects the
working morale and teamwork spirit within the agency because
these changes will always be followed by the resignation of key
members of the working teams already nurtured by the outgoing
senior officials.

Such shakeups or reorganization would not normally cause great
concern, nor would it merit a comment in this column, but the
institution affected is IBRA, which is currently perhaps the most
important economic organization in the country. It is worth
recalling that the agency now manages more than US$64 billion in
assets taken over from closed, nationalized and recapitalized
banks and is by itself responsible for the collection of more
than 10 percent of total state revenue for this fiscal year. As
the assets consist mostly of enterprises the agency practically
manages all major banks and most major companies and consequently
plays a vital role in determining the pace of economic recovery.

Even though IBRA said on Tuesday that the two senior officials
would remain in their current job positions until their
resignations were accepted by the finance minister, the agency's
performance will certainly be affected, especially because Jerry
Ng is responsible for bank restructuring and Mahmuddin Jassin for
asset management investment, two of the most important programs
of the agency.

Financial remuneration is obviously not behind the resignation
because the level of pay at IBRA is among the highest in domestic
institutions which is one of the reasons as to why the agency has
been able to recruit some of the best brains in the country.

Jassin kept tight-lipped about his reason for leaving but
Jerry Ng's reason for quitting is very weak, apparently cited as
being only to avoid rocking the boat. He said he decided to quit
as the bank's restructuring process had technically reached its
completion and he thought it was now time to pursue his career at
another bank (Standard Chartered Bank in Singapore). As a well-
experienced banker Ng must know that what has so far been
completed is only recapitalization. The other most important
element of the program -- the operational restructuring of banks
-- has only just started.

The resignation of the two senior officials has once again
reminded us of the criticism often targeted at the ministerial
Financial Sector Policy Committee that is headed by chief
economics minister Rizal Ramli. This committee is the highest
decision-maker and policy-making body for IBRA and has to approve
every major deal processed by the agency's management.

But this committee has often allegedly acted as a conveyor of
political pressures from vested-interest groups, notably
businesspeople (and biggest debtors) with strong connections with
political leaders who have lobbied for specially favorable
treatment.

Obviously, bright professionals in the IBRA's top management
such as Ng and Jassin would find such a working environment
completely inconducive to their professional competence and
integrity, two vital requirements for effective implementation of
the agency's role that is ripe for abuse. Such professionals are
usually capable of, and have the courage to stand up against
insensible and irrational directives from their boss and prefer
to quit, rather than compromising their integrity.

The government must now realize that undue political
intervention into IBRA's work would eventually not only push out
most of the agency's brightest staff with high principles and
integrity. It would also damage investor confidence in IBRA
because stability and continuity in senior management is pivotal
to the agency's ability to do its job effectively.