BI to complete divestment program this year: Sjahril

JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on Friday that the central bank would divest all of its ownership in various financial institutions this year.

Sjahril said that the divestment of the Bank Indonesia subsidiaries would be conducted either through the stock market or a private placement to strategic investors.

"We're proceeding with the divestment program ... We'll adjust our strides to the (new) central bank law," he said in response to a question about the divestment plan.

Sjahril was speaking to reporters following Friday prayers at the central bank headquarters.

He said that the central bank had no revenue target from the divestment program because it would all depend on the market condition.

He declined to provide the list of the Bank Indonesia investment in financial institutions.

A source, however, said that the Bank Indonesia subsidiaries included the Netherlands-based Bank Indover, credit insurance firm PT Askrindo, investment bank and securities firm PT Bahana Pembinaan Usaha Indonesia and PT Bina Usaha Indonesia, a multifinance company catering to small and medium-sized enterprises.

The source declined to provide financial data and the size of Bank Indonesia ownership in the aforementioned companies, arguing that the central bank was still in the process of negotiation with various strategic investors.

But Sjahril said that the Bank Indonesia had only a minority stake in the companies.

The International Monetary Fund had initially demanded Bank Indonesia complete the divestment of its subsidiaries by the end of last year.

Sjahril did not say what the reason for the delay was, but Bank Indonesia had been engaged in a long dispute with the government over the controversial government bank liquidity support facility.

Also, the embattled central bank governor was kept in the custody of the Attorney General's Office for five months last year over alleged involvement in the high-profile Bank Bali scandal.

The House of Representatives is currently in the process of deliberating the amendment of the central bank law. This is expected to be completed in the middle of this month.

Under the proposed amendment, Bank Indonesia must complete the divestment program this year.

According to the existing central bank law, Bank Indonesia's role is to design and implement monetary policy, maintain the country's payment system and supervise the banking sector.

The law stipulates that Bank Indonesia can only have equity participation in clearing agencies, rating agencies and bank deposit guarantee agencies.

Approval from the legislature should first be sought for investment in other institutions.

There has been allegations that Bank Indonesia investment in various financial institutions in the past was based on collusion, nepotism and corruption practices. (rei)