Bank Danamon sell-off faces obstacles
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.