Bank Danamon sell-off faces obstacles
Dadan Wijaksana, The Jakarta Post, Jakarta
The government's plans to divest a majority stake in Bank Danamon look set fair to encounter more turbulence after the House of Representatives' banking subcommittee requested a delay on Monday.
The House budget committee's banking subcommittee pointed to the current weakness in the market and the absence of a law governing the divestment of state assets and the privatization program.
"We want the divestment of the government's stake in Bank Danamon to be preceded by the enactment of a law on divestment and privatization," subcommittee chairman Paskah Suzetta told reporters after a meeting with officials of the Indonesian Bank Restructuring Agency (IBRA), the government agency that holds the Bank Danamon stake.
Paskah argued that without such a law, the divestment program would lack a strong legal basis and would thus be prone to potential backlashes from various "stakeholders."
The House budget committee, however, has yet to endorse the recommendation of the subcommittee.
IBRA has started the process of selling the Bank Danamon stake, and it had expected that the process will be completed sometime in April.
The agency controls around 99.4 percent of the shares in the publicly-listed bank, while the remaining shares are held by the investing public.
IBRA plans to sell up to a 20 percent stake in the bank on the stock market first, to be followed later by the sale of a larger 51 percent stake to a strategic investor.
The sale via the stock market is regarded as crucial, not only to test the market but also to obtain a benchmark price for the next stage of the divestment.
The sale of the Bank Danamon stake is part of the effort to restructure the country's still-weak banking industry. The proceeds from the sale are to be used to help finance the 2003 state budget deficit.
Although the sale of the IBRA assets that were taken over by the agency from ailing banks and indebted bank owners in the wake of the late 1990s financial crisis, do not require House approval, the government always regards the agreement of the House as being crucial to avoid a political backlash against the privatization program.
On the other hand, however, seeking the legislature's support has proved to be time-consuming.
The Bank Danamon sale should have started in July of last year. But it was delayed due primarily to political meddling, coupled with a lack of interest from foreign investors in the country's banking assets.
Elsewhere, in his response IBRA chairman Syafruddin Temenggung said that another delay in the program would create uncertainty, which would in turn further discourage new investment from coming to the country.
"The divestment can be carried out now to give rise to positive sentiment so as to increase the price of Bank Danamon shares," he said.
Syafruddin added that IBRA would promote the bank's divestment through a series of meetings with local investors on Wednesday and an overseas road show to Hong Kong and Singapore in the following days.
IBRA said Bank Danamon's 2003 net profit was forecast to increase by 46 percent to Rp 1.38 trillion from an estimated Rp 948 billion in 2002.
Actual figures for 2002 are expected in March.
The bank is expected to boost outstanding lending to Rp 31.80 trillion from Rp 18.20 trillion last year.