BI urged to help small firms
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)