Auditors issue 'disclaimer of opinion' on IBRA

Auditors issue 'disclaimer of opinion' on IBRA

JAKARTA (JP): The Indonesian Bank Restructuring Agency
(IBRA)'s 2000 financial report gets from auditors a "disclaimer
of opinion", which may further damage the reputation of the
agency.

IBRA's new chairman I Putu Ary Suta said on Monday the
disclaimer of opinion was issued because the auditors doubted the
figures in the financial report due to the unclear status of Bank
Indonesia's liquidity support (BLBI), the government placement in
banks under IBRA, unresolved legal cases as well as the impact of
the current economic crisis.

Ary Suta said he would immediately set up a special task force
to resolve the above problems so that the disclaimer of opinion
could be removed within six months.

Public accountants Hans, Tuanakotta and Mustoffa audited IBRA
2000 financial report.

The agency also previously received a disclaimer of opinion
over its 1999 financial report, which prompted legislators to
criticize the agency.

IBRA, a unit of the finance ministry, was set up in early
1998. The agency received various assets from troubled domestic
banks and indebted bank owners. It has a mandate to restructure
the assets, including non-performing loans (NPLs), and sell them
to raise cash to help finance the state budget deficit, which is
the result of the huge bank recapitalization shouldered by the
government.

The government via Bank Indonesia has injected some Rp 144.5
trillion (US$12.67 billion) in BLBI funds between 1997 and 1999
to help ailing banks stay afloat. In return the banks surrendered
their assets to IBRA to cover the government's emergency loan.

But the Supreme Audit Agency (BPK) revealed in its audit
report that around Rp 138 trillion of the BLBI emergency loan had
been misused by the recipient banks, mostly owned by the family
and friends of the country's former authoritarian leader
Soeharto.

BPK also said the misuse was primarily caused by weak
supervision of the central bank.

The government initially refused to cover the BLBI funds,
putting Bank Indonesia at risk of bankruptcy if it had to cover
the emergency loan.

The finance ministry and Bank Indonesia finally agreed last
November that the central bank would only have to cover about Rp
24 trillion, while the remainder would be covered by the
government. In return, several members of Bank Indonesia's board
of governors tendered their resignation. President Abdurrahman
Wahid demanded at the time that Bank Indonesia Governor Sjahril
Sabirin resign.

But until now, the House of Representatives has yet to approve
the finance ministry-Bank Indonesia agreement, casting doubts on
the BLBI figures in the IBRA 2000 financial report.

"The legal aspect of the BLBI transfer to IBRA is
questionable," Ary Suta said.

Ary Suta said the other reasons for the disclaimer of opinion
included the Rp 8.7 trillion revenue figure received by IBRA from
unidentified debtors, and the government placements in Bank
Central Asia (BCA), Bank Danamon, Bank PDFCI and Bank Tiara Asia
which had yet to be approved by the finance ministry. The latter
two banks had been merged into Bank Danamon.

He also said the public accountants could not confirm the
value of IBRA's claims on 50 top debtors which together accounted
for 38 percent of the total bank NPLs managed by the agency.

Elsewhere, Ary Suta said according to the auditors, the fair
value of assets under IBRA at the end of 2000 was estimated at Rp
167.7 trillion, much lower than the 1999 estimate of Rp 645.8
trillion.

He said the calculation of the fair value of the assets was
made using IBRA's methods.

But he said the above value estimate was only for the purpose
of internal reporting, not for assets sales or negotiations with
third parties.

"If this (fair value) figure is used as a benchmark, then the
potential recovery rate from the IBRA assets is only 26 percent,"
Ary Suta said.

The House has earlier demanded a 70 percent recovery rate.

New Finance Minister Rizal Ramli had earlier said the quality
of the assets under IBRA had continued to deteriorate both due to
poor management and the prolonged economic crisis.

Rizal has therefore called on the agency to speed up the sale
of the assets, pointing out that the agency had so far only sold
20 percent of the assets.

The government plans to dissolve IBRA by February 2004.

On his inauguration, Ary Suta vowed to accelerate asset sales.
He said he would revamp the organization, and shorten the
decision making process within the agency.

IBRA is targeted to raise around Rp 27 trillion in cash this
year. By the end of June the agency had raised around Rp 11.25
trillion.

There has been concern that amid the current economic woes and
domestic political instability, IBRA may fail to meet the cash
target for 2001.

The government has issued about Rp 430 trillion worth of bonds
to help finance the recapitalization of ailing domestic banks.
The interest cost of the bonds is covered by the state budget.
(rei/bkm)