Fri, 23 Jun 2000

Bambang threatens stubborn debtors

JAKARTA (JP): Minister of Finance Bambang Sudibyo warned indebted businesspeople on Thursday to cooperate in settling their debts to domestic banks or risk the seizure of their assets and legal prosecution.

The minister said the government would begin taking legal action against recalcitrant debtors next month.

"We will seize the assets of uncooperative debtors and prosecute these people. This is already a firm decision," he told House of Representatives Commission IX on the state budget and finance during a hearing.

He said that both Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie and Attorney General Marzuki Darusman had agreed to such measures.

Bambang said the Indonesian Bank Restructuring Agency (IBRA) had so far identified four businesspeople who continued to be uncooperative in settling their debts, including timber tycoon Mohamad "Bob" Hasan, the long-time golfing partner of former president Soeharto.

He said the government also had decided to provide incentives, including tax breaks, to those debtors who cooperated in settling their debts.

Bambang rejected the demand by a number of legislators that the government reduce the principal of the debts to accelerate the debt restructuring process.

"We should not be hasty in providing debt forgiveness," he said.

Golkar Party legislator Paskah Suzetta insisted the government should provide debtors with relief, saying the government had bailed out the country's banks by financing up to 80 percent of the bank recapitalization costs.

He said the indebted companies were being treated unfairly by the government.

But Bambang dismissed the idea that the government was bailing out the bankers, pointing out that former bank owners had been forced to surrender their assets to repay the full value of their debts to the government.

IBRA manages approximately Rp 220 trillion in nonperforming loans (NPLs) transferred from banks which were closed, nationalized or recapitalized.

The agency is currently prioritizing the restructuring of some Rp 84 trillion worth of NPLs owed by 21 business groups, mostly owned by influential businesspeople.

In addition to the NPLs under IBRA's management, banks also are struggling to restructure the NPLs under their own management.

Many people have expressed concern over the slow pace of restructuring these NPLs. Experts have said restructuring the NPLs was key to the resumption of bank lending to the real sector, and the recovery of the country's crisis-hit economy.

Bank Indonesia recently relaxed a number of regulations to accelerate the debt restructuring process.


At the hearing, Bambang also said his office expected the budget deficit in 2001 to be approximately 3.7 percent of gross domestic product (GDP), compared to 4.8 percent this year.

He said domestic revenue, particularly from taxes, must be increased and spending cut to achieve this lower deficit.

"The government will try to reduce the deficit because we want to reduce our dependence on foreign loans," Bambang said.

Indonesia's sovereign loans total some US$75 billion. Several multilateral and bilateral organizations have provided the loans, including the World Bank, the Asian Development Bank, the International Monetary Fund and the Consultative Group on Indonesia.

There have been increasing calls for the government to reduce foreign borrowing, including following the lead of Thailand and ending its participation in the IMF-led economic bailout program.

The IMF has promised the current administration some $5 billion in loans to help finance the country's three-year economic reform program. The fund so far has disbursed more than $700 million.

The state budget is currently under pressure, particularly due to the huge cost of the country's bank restructuring and recapitalization program.

Bambang also told legislators his office was drafting a new law to boost the independence and effectiveness of the country's capital market supervisory agency, Bapepam. He said the law would include stronger sanctions for violations of capital market regulations.

Bambang said his office would soon seek the green light from the President to proceed with the drafting of the law, adding that the draft was expected to be submitted to the legislature by November. (rei)