Businesses want bankruptcy law enactment delayed

Businesses want bankruptcy law enactment delayed

JAKARTA (JP): Business associations are urging the government
to delay the implementation of the new bankruptcy law, saying it
will only benefit the creditors.

The chairman of the Indonesian Real Estate Association, Edwin
Kawilarang, said Friday the law must not be enacted while the
economic situation remained uncertain.

Edwin said the government must take into consideration that
most debtors could no longer repay their debt when the rupiah was
still fluctuating.

"At a time when the currency rate has not stabilized, it will
be hard for the businesses to repay their debts," he was quoted
by Antara news agency as saying.

The rupiah's more than 80 percent drop against the U.S. dollar
since the middle of last year has inflated the private sector's
dollar-denominated debts, amounting to US$83.6 billion if about
$14 billion in short-term debts is included.

The head of the lobbying team in the Indonesian Chamber of
Commerce and Industry, Pungky Bambang Purwadi, said the private
sector was practically facing a force majeur, in which an event
or effect cannot be reasonably anticipated or controlled.

Punky said in addition to the collapse of the Indonesian
currency, businesspeople were also suffering a liquidity problem
due to the high lending rates resulting from the government's
tight monetary policy.

According to legislator Paskah Suzetta, the government should
first issue guidelines on the implementation of the revised
bankruptcy law to avoid a conflict between debtors and creditors.

"It is better that the bankruptcy law is followed with the
establishment of the implementation guidelines, so that there
won't be partial interpretation by both creditors and debtors."

The revision of the law is part of Indonesia's commitment to
meet the International Monetary Fund's (IMF) reform program.

The law, which took effect last week, replaced the previous
antiquated bankruptcy code, based on the 1905 Dutch insolvency
ordinance which was deemed opaque and inefficient in resolving
contemporary commercial cases.

An analyst pointed out, however, that the success of the law
would depend largely on the commitment of the people behind its
implementation.

"Partiality on the part of judges could undermine the new
law's effectiveness from the start, and, in this regard,
Indonesia's track record is not good."

Some doubt the new court will be able to meet its ambitious
deadline.

"The new court could be swamped in the beginning with cases,
given the state of the economy and the number of companies with
debts servicing problems," another analyst said.

The ability of the debtors to appeal to the Supreme Court
could be another potential stumbling block in the procedure.

Under the new law, a final ruling for a credible creditor
should be decided in no more than 300 days after the petition is
filed. These include the 30-day period of appeal and 270-day
suspension of payments period.

Legal analysts said that the law would only benefit creditors.

Others reminded the existence of a bankruptcy law would not
necessarily guarantee that creditors would get their money back
immediately.

Bankruptcy proceedings take time, and activities such as
identifying the assets, finding buyers and agreeing on prices
would be further complicated by the woeful economy and caution on
the part of trustees who can be held liable for any errors made.

Creditors might receive nothing from borrowers who have fled
the country with their wealth in numerous fraudulent bankruptcy
cases. This would also apply if the borrowers had no assets left
with which to repay their debts.

But the analysts expressed optimism that the bankruptcy law
marked a strong set of ground rules for the future.

They believed it would likely lure back lenders who would feel
more secure that they could resort to a legal solution in case
their debtors ran into payment problems. (das)