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)