BCA, Niaga sale plan approved

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)