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)