BCA, Niaga sale plan approved

JAKARTA (JP): The House of Representatives banking committee gave its approval on Wednesday to the government's crucial program to divest its shares in the publicly-listed Bank Central Asia (BCA) and Bank Niaga in the first semester of this year.

The final approval is expected to be given at a session of the House's Commission IX on state budget and finance to be attended by finance minister Prijadi Praptosuhardjo on Thursday.

"In principle, we have agreed to the (divestment) plan. But the final approval will be given at a plenary session tomorrow," legislator Dudhie Makmun Murod told reporters following a closed- door meeting between the committee and top officials of the Indonesian Bank Restructuring Agency (IBRA), a unit of the finance ministry.

Asked about the timing of the sale, Dudhie said that it was up to the agency, but the House wanted the government to obtain optimum results from the divestment program.

"It's probable that they (the House) will approve the (sale) plan. The (Tuesday) meeting was positive," said IBRA chairman Edwin Gerungan, but declined to comment further.

The sale of the government's stakes in BCA and Bank Niaga is one of the preconditions set by the International Monetary Fund for the disbursement of its next US$400 million loan tranche to Indonesia. The Fund has so far disbursed around $1 billion out of the IMF's total promised loan of $5 billion.

If the House does give its approval for the plan, it would help improve relations between the government and the IMF.

The government was supposed to have already completed the sale late last year but it was delayed on the grounds of the poor market conditions prevailing at that time. It was this that prompted the Fund to delay the disbursement of its loan.

Earlier this year, the government said that it planned to complete the divestment program in June. But the increasing conflict between President Abdurrahman Wahid and the legislature has raised concerns that the plan might be delayed again.

The IMF's disbursement of the current tranche may not be important in terms of size, but it could help revive investor confidence in the economy and also open the way for other major multilateral and bilateral lenders to provide loans or assistance.

Relations between the government and the IMF reached their nadir recently due to the delay in the disbursement of the IMF loan and the Fund's concerns over the government-proposed bill on the amendment of the central bank law, as well as the delay in the BCA/Bank Niaga sale and the poorly-designed fiscal decentralization policy.

The Coordinating Minister for the Economy Rizal Ramli met with top IMF officials in Washington last week to lobby the Fund to disburse the loan.

Rizal said earlier this week that the government and the IMF had reached "agreement" over the difficult issue of the amendment of the central bank law. The two sides have agreed to form a panel of international and domestic experts to provide input for the amendment of the legislation.

The IMF had feared that the amendment would threaten the independence of Bank Indonesia, but the government has insisted that the amendment is aimed at improving the accountability of the central bank.

The row between the government and the IMF had contributed to the sharp fall in the exchange rate of the rupiah against the U.S. dollar to a two-year low of around Rp 9,900 per U.S. dollar earlier this week.

The government nationalized BCA and Bank Niaga after the two banks were badly hit by the Asian financial crisis that started in the middle of 1997.

The government divested around 22.5 percent of its ownership in BCA in May last year.

The proceeds from the sale of the two banks will contribute to IBRA's target of raising around Rp 27 trillion in cash this year to help finance the state budget deficit.

IBRA has proposed selling another 30 percent of the government's stake in BCA, and at least 51 percent of its stake in Bank Niaga.

Elsewhere, Dudhie said that the House banking committee had recommended that IBRA sell BCA through the stock market, and that Bank Niaga be divested through a strategic sale.

"The strategic sale approach would provide a better outcome. The government can then later sell more shares via a public offering if the conditions have improved," he said. (rei)