BI urged to help small firms
JAKARTA (JP): Bank Indonesia, the central bank, was urged yesterday to provide bridging finance to business customers of the 16 closed banks to prevent them from going into bankruptcy, otherwise the already swollen ranks of the unemployed would further explode.
"I think such a facility is quite crucial to prevent corporate customers of the closed banks from having to lay off thousands of more workers," said Sofjan Wanandi, the chairman of the Gemala Group.
Sofjan told The Jakarta Post yesterday that since the customers of the 16 closed banks would only be able to initially recover up to Rp 20 million per account, most corporate clients would have to wait for the completion of the banks' liquidation process, which might take five years.
"I don't think any of the business customers would be able to survive even for a few months, let alone for five years. That means that they would have to close down, thereby terminating the jobs of tens of thousands of people," Sofjan said.
"Given the great risk of social unrest and political instability, I suggest that Bank Indonesia use part of the loan from the IMF for bridging finance. I don't think the IMF would object to such an allocation," he said.
Sofjan, who is also spokesman for the Prasetya Mulya forum of business conglomerates, was commenting on the impact of the finance minister's decision on Nov. 1 to close 16 insolvent banks as part of a reform package approved by the International Monetary Fund.
The reform package is supported by US$23 billion in standby loans from the IMF, World Bank and Asian Development Bank and other sources, which will be disbursed within three years.
Three state banks will reimburse the customers of the closed banks starting tomorrow, but only up to Rp 20 million per account. The central bank has set aside Rp 2.3 trillion in taxpayers' money for the reimbursement.
The central bank said that 93.7 percent of depositors of the closed banks had accounts containing under Rp 20 million, meaning that most depositors will have their savings returned.
But Sofjan estimated that corporate customers accounted for more than 70 percent of third-party funds at the closed banks and most of them were small and medium-scale businesses.
"If these small and medium-scale business customers do not get some kind of bridging finance, they will fall into bankruptcy. This consequence is quite scary, in view of the already critically high rate of unemployment in the country," Sofjan said.
Sofjan greatly appreciated the IMF's involvement in helping design a reform package to stabilize Indonesia's economy and to restore market confidence in the country.
The people and the government should be united in supporting the implementation of the reform measures to stabilize the economy and eventually restore it to a stronger footing, Sofjan said.
"But I sincerely hope the IMF approach is not 'one size fits all', without taking into account Indonesia's special characteristics, such as its huge population (of 200 million), massive unemployment, low per capita income and high incidence of poverty."
Obviously, Sofjan said, Indonesia should be treated differently from Mexico and Thailand.
"What I am suggesting is that the IMF should be flexible in its prescription of reform measures. The most critical point is to prevent the reform measures from causing an additional explosion of unemployment," Sofjan cautioned.
He noted that even without new layoffs, the low economic growth (below 5 percent) predicted for the next two years would make it impossible to absorb the 2.5 million new job seekers entering the labor market every year. (vin)