BCA, Bank Niaga divestments delayed

BCA, Bank Niaga divestments delayed

JAKARTA (JP): The government agreed with the House of
Representatives on Thursday to delay the key divestment program
involving the publicly listed Bank Central Asia (BCA) and Bank
Niaga.

Chairman of the Indonesian Bank Restructuring Agency (IBRA)
Cacuk Sudarijanto said that delaying the divestment of the two
banks would allow the government to obtain "optimum" proceeds.

"We agree to delay the divestment," Cacuk told the House
Commission IX on banking and state budgeting in a consultation
session which was also attended by Minister of Finance Prijadi
Praptosuhardjo.

IBRA is a unit under the finance ministry.

The government promised the International Monetary Fund last
month that it would divest a majority of its ownership of BCA and
Bank Niaga by the end of this year at the latest, as stated in
the letter of intent (LoI).

Prijadi told the legislators that the government had two
options: to divest the two banks immediately but at a risk of
raising less than optimum proceeds or to delay the divestment
with the hope of getting a better deal once the banks'
performance continued to improve.

"We think the price will be better next year ... It's been
forecasted that BCA's profit will continue to increase," Prijadi
said.

He explained that the IMF had been pressuring the government
to immediately sell the assets under IBRA, including BCA and
Niaga, to help revive investor confidence in the economy and to
raise revenue for the state budget.

The IMF feared that a further delay could affect the selling
price.

"We have different assumptions (than the IMF)," he said.

Prijadi said that BCA was one of the country's best banks with
a strong network and a sophisticated IT system.

Most legislators supported the delay of the BCA and Bank Niaga
divestment program.

"We don't agree that the country's best assets should be sold
quickly at a low price," said Theo Teoemion, a legislator of the
Indonesian Democratic Party of Struggle (PDIP), the largest
faction of the House.

He said that delaying the divestment until the country's
macroeconomic and political situation improved made sense.

"The government wants political support from us to make the
delay. We will give it," added another PDIP legislator Didi
Supriyanto.

The BCA and Bank Niaga divestment program is one of the key
programs set in the LoI. A delay in any key program could put the
country at risk of sanctions from the IMF, including a delay in
the next disbursement of the Fund's loan.

The IMF is scheduled to send a review team to Jakarta at the
end of this month to assess the country's economic reform program
outlined in the LoI.

IBRA nationalized BCA and Bank Niaga last year in a bid to
save the banks from bankruptcy caused by the heavy blows suffered
during the financial crisis.

IBRA sold some 22.5 percent of BCA through an initial public
offering last May, raising some Rp 927 billion in cash, which was
contributed to help finance the deficit in the current state
budget.

The agency now owns 70.3 percent of BCA, while the remaining
7.2 percent is held by the Salim Group, the bank's founder.

The agency holds a 97.15 percent stake in Bank Niaga, and the
remaining 2.85 percent is held by the public.

Legislators also urged the government not to allow the Salim
Group to repurchase its stake in BCA on the grounds that the
founder had sent the bank into trouble and forced the government
to perform a costly bailout.

"We agree. Our policy is not to allow the founder to
repurchase its stake in the bank. But you know that they are
sophisticated and have many tricks," Prijadi said.

Cacuk added that it was nearly impossible for the government
to prevent the founder from making a repurchase through the
secondary market.

Legislators also called on the government to implement the
divestment through a public offering method because it was more
transparent.

They argued that a private placement mechanism was less
transparent.

But Cacuk said that a private placement mechanism was
preferred by strategic investors who could provide the government
with a premium price.

The BCA and Bank Niaga divestment was also supposed to help
finance the deficit in the current state budget. IBRA is targeted
to raise some Rp 18.9 trillion but so far the agency had only
contributed around Rp 12 trillion to the budget.

But Cacuk was confident that the agency could meet its target
in the remaining three months of the year.

"We'll expedite our debt restructuring program," he said.

IBRA controls various banking assets worth hundreds of
trillion rupiah. The agency also manages some Rp 250 trillion in
bank non-performing loans (NPLs). IBRA is mandated to restructure
and recover the NPLs.

In 2001, the agency is targeted to raise around Rp 27 trillion
in cash.(rei)