Ary Suta plans to shorten IBRA chain of command

JAKARTA (JP): Newly appointed chief of the Indonesian Bank Restructuring Agency (IBRA), I Putu Ary Suta, said he planned to revamp the organization and shorten its decision flow to help expedite the restructuring of corporate debts.

Ary Suta said that after less than a week at his new post, he concluded that IBRA's decision flow was too complex, which made it difficult to reach decisions quickly.

"What we're trying to do is first to shorten that (decision flow) within IBRA," he told businessmen at a meeting with the Indonesian Chamber of Commerce and Trade (Kadin) on Saturday.

"I was surprised to find out that even small decisions require the signatures of 13 different people," he said.

Decisions on restructuring deals, he continued, were even more complex, causing long delays in negotiations.

According to him, the involvement of a large number of people in the decision-making process has become a preventive measure to stave off corruption and collusion charges against IBRA.

"Better to be wrong together than wrong alone," he said.

Ary Suta's concern to speed up IBRA's restructuring process comes after his predecessor Edwin Gerungan was dismissed, following criticism that IBRA was working too slowly.

The appointment of Ary Suta followed the government's dissatisfaction over Edwin's performance.

Last month, the recently appointed Minister of Finance Rizal Ramli charged his predecessor and IBRA with undermining debt deals approved by the Financial Sector Policy Committee (FSPC).

The committee groups together several senior economic ministers who have the final say on the country's major corporate debt deals.

Rizal has said that the speedy restructuring of corporate debts was vital to the country's economic recovery.

Businessmen have also been complaining about the agency's elaborate bureaucracy, saying it hindered restructuring talks.

"The restructuring process is slow because there has been no direction," Ary Suta added.

He was referring to IBRA's requirement to seek the FSPC's approval for certain debt deals, and the possibility of such a deal being revised later on.

Apart from the FSPC, IBRA also has an oversight committee, which was established to evaluate the agency's decisions and make recommendations to the FSPC.

The oversight committee has no authority to alter IBRA's policies, but could recommend a change before the FSPC.

Furthermore, IBRA, as a unit of the finance ministry, must also seek the ministry's approval, including for deals that have been decided by the FSPC.

Theoretically, this should not pose a problem since the finance minister is a member of FSPC. In practice, however, many of the deals are not implemented.

"It's better if everyone sits together from the very beginning to come to an agreement, rather than having to revise it later on," he said.

He said IBRA should stick to its deals with investors, lest investors' confidence on its restructuring programs fades away.

He further lashed out at the pervasive presence of IBRA consultants, who only worsened the already complex decision process.

"We have got legal consultants, financial consultants, management consultants, operational consultants, and more," he complained.

Ary Suta said IBRA's reliance on these consultants proved to be costly, and caused negotiations to become "tiresome."

He also said that bringing uncooperative debtors to court was the least preferable solution, because IBRA rarely won a case.

"Our success rate in litigation is very small, while on the other hand, taking legal action is expensive," he said.

If IBRA's debtors, during negotiations, are deemed as uncooperative, they can be brought to court to seek the liquidation of their assets.

However, some debtors have been able to save their assets from IBRA, a situation that many blamed on loopholes in the bankruptcy law.

IBRA was established during the height of the economic crisis in 1998 to take over non-performing loans from local banks.

The agency's task is to restructure corporate debts, for which debtors must transfer their assets as collateral to IBRA.

At present, it controls some Rp 600 trillion (about US$52 billion) in assets taken over from debtors. (bkm)