Companies must report foreign debt position

Companies must report foreign debt position

JAKARTA (JP): The government has moved to implement some of
the new reforms agreed with the International Monetary Fund (IMF)
by issuing regulations on corporate debt, state bank mergers and
the establishment of a company to manage the assets of ailing
banks.

A Ministry of Finance spokesman said Friday that Presidential
Decree No. 56/1998, dated April 8, required all companies to
report the extent of overseas debt to Bank Indonesia. Friday was
the day details of the new agreement struck with the IMF were
released.

The first reports on corporate debt should be submitted by
April 30, and must include details of the amount of principal
debt, loan requirements, the period of repayment, interest rates,
lending cost, use of credit and the creditor's name.

"This policy aims to create a mechanism to facilitate the flow
of information on private external debt," the spokesman, Agus
Haryanto, said.

He said the decree would allow the first estimates of
corporate debt restructuring requirements to be made.

Companies that fail to comply with the call would face
"administrative sanctions," Agus added without elaborating.

Indonesian private corporate debt, US$74 billion at the end of
last year, has been identified as one of the major causes of the
economic crisis that has blighted the country for the past eight
months.

The new agreement with the IMF specifically addresses the
problem of corporate debt for the first time. Under the terms of
the agreement, the government will set up a framework for the
repayment of the country's crippling external debt.

The government has elected to copy the method used by Mexico
to ease private sector debt when their economy was troubled by a
sharp currency devaluation. The method came to be known as the
Ficorca plan.

Under the Ficorca model, indebted companies were given an
eight year period of grace by their creditors. During the first
four years, debtors paid out only interest on the borrowed sum.
Payments on the principal recommenced thereafter.

The government also announced that Bank Bumi Daya and Bank
Pembangunan Indonesia, both state owned, would be merged into one
bank through Government Regulation No. 48/1998, dated April 8.

Agus said bank depositors should not be worried because the
new bank, as yet unnamed, would honor all its obligations.

"Customers of the two state banks will automatically become
customers of the new bank, which will have a better and wider
network," Agus said.

The Ministry of Finance also announced the establishment of a
state-owned company assigned to manage the assets of suspended
and ailing banks, through Government Regulation No. 47/1998.

Agus said the government would fund the new firm through the
state budget. The amount allocated will be decided by the finance
minister at a later date. (rid)