Bank Bali a test case for restructuring: IBRA

Bank Bali a test case for restructuring: IBRA

SINGAPORE (Dow Jones): The sale of a stake in Bank Bali will be a litmus test for Indonesia's efforts to restructure its troubled banking system with the help of foreign investors, the deputy chairman of the agency in charge of the effort said Thursday.

Farid Harianto of the Indonesian Bank Restructuring Agency, or IBRA, said he wanted an agreement to sell a 20 percent stake in the insolvent bank to Standard Chartered Bank to go through, despite protests by Bank Bali employees.

Farid acknowledged that the protests, and a resulting investigation by his agency, could be discouraging to foreign investors.

"This is really a test case for us," Farid told Dow Jones Newswires in an interview on the sidelines of a conference organized by Business Week in Singapore. "This is why we will do our utmost to make it happen."

The stakes are high. Indonesia plans to raise Rp 17 trillion in the fiscal year ending March, and another 17 trillion between April and December 2000, Farid said. IBRA expects to meet its target for the current fiscal year, he said.

Standard Chartered has signed a management contract to run Bank Bali and is also slated to buy 20 percent of shares from the government, which has nationalized the bank.

But Bank Bali staff members loyal to its former management and owners have complained that Standard Chartered incurred excessive expenses, which it charged to the bank, and laid off too many employees.

The complaints, which were echoed in Indonesia's House of Representatives, sparked an investigation by IBRA, which has temporarily relieved Standard Chartered of its management duties.

But Farid said the allegations were overblown. "For me, it was a normal commercial dispute, but it has become politicized by the employees."

Farid said the management contract will be amended to state Standard Chartered's role, and the division of expenses, more clearly. He stressed that the contracts with Standard Chartered to manage the bank and take an equity stake were still in place.

"Bank Bali is a good bank and there is merit to investing in and recapitalizing the bank together with Standard Chartered," he said. "In the meantime, we need to restore confidence as well as the liquidity position of the bank."

After Bank Bali, Indonesia hopes to sell another four major financial institutions quickly. Among them will be Bank Central Asia, which Farid called the country's "crown jewel." The agency plans to sell a stake in the bank of between 15 percent and 30 percent in the first quarter of next year.