Committee reveals flaws in debt extention plan
Berni K. Moestafa, The Jakarta Post, Jakarta
A review by a government watchdog has exposed glaring imbalances in a plan to extend the payment period for large debtors of the Indonesian Bank Restructuring Agency (IBRA) that, if not revised, risked the government's effort to recoup some $13 billion in lost state funds.
In what marks another hit at the controversial debt extension plan, the independent Oversight Committee (OC) said on Thursday that only cooperative debtors should be eligible to benefit from the plan.
This would rule out the majority of debtors, whom IBRA says are uncooperative but in respect of whom the plan is actually targeted.
"For the sake of justice, the FSPC decision, if applied, should consider whether debtors have shown good will or not," OC chairman Mar'ie Muhammad said in a statement.
The OC said that various of its studies had shown that most debtors had shown a "lack of good will" in meeting their obligations.
Its recommendations are not binding. But the OC reports to the Financial Sector Policy Committee (FSPC), which groups together senior economics ministers in charge of IBRA's large debt deals.
The FSPC approved an IBRA initiated plan last month to grant debtors an extension of their repayment periods, which for many end this year.
The shareholders' settlement program applies to former bank owners, whose banks the government bailed out of the financial crisis in the late '90s.
It later turned out that most had misused the bailout funds, including redirecting them to affiliates in violation of Bank Indonesia's legal lending limit ruling.
To avoid prosecution, the former bankers agreed to a four-year cash and asset settlement program, starting in 1998.
But three years into the program, almost all have been avoiding repayment, which has led IBRA to bring in the debt extension plan.
Under the plan, debtors will have up to 10 years instead of four, and must pay interest of at least only 9 percent as against the current rate of some 17 percent, depending on Bank Indonesia benchmark rates.
But as the easier terms of payment have attracted public criticism, the OC has identified more imbalances that may come at the expense of IBRA.
The plan offers debt haircuts as incentives, which the OC says should be given only after debtors repay their debts.
The OC also noted the absence of any measures to prevent debtors from stripping off the value of their assets before handing them over to IBRA.
Debtors who, according to an internal IBRA audit, owe more than their present debt deal stipulates, should have their deals revised upwards to reflect the actual amount, the OC added.
It said the former bankers should only be released from the threat of prosecution after they had settled their debts, and not before.
The plan has yet to receive the governments' full support, and an interministerial team is currently at work reviewing it.