Conflicting interests leave govt decree on SMEs in limbo

The Jakarta Post, Jakarta

Conflicts of interest are seen as a major stumbling block for the government in issuing a presidential decree on the restructuring of bad debts owed by small and medium enterprises (SMEs), a senior government official has said.

The important presidential decree should have been issued by the government by the end of June or at least in early July, but it has to be delayed as the government is still facing difficulties reconciling interests among the consenting parties.

"The problem is so complex. The scheme involves many parties with different interests, so that the issue needs deep thought before it is adopted into a policy," Mahendra Siregar, a special advisor for the Coordinating Minister for Economic Affairs, told The Jakarta Post on Saturday.

Mahendra failed to mention when the decree would be completed and made public, merely saying that "it would be announced in the near future."

According to Mahendra, the conflicting parties in the matter include SMEs debtors, entrepreneurs, the banks and the Indonesian Bank Restructuring Agency (IBRA).

Mahendra did not reveal the details of the conflicts of interest.

But it is common knowledge that the restructuring plan, which entered public discourse early this year, has drawn controversy within the government, public and the consenting parties themselves.

At the grassroots level, one reason behind the sluggish deliberation on the presidential degree is that some of the debts are not necessarily SMEs'.

The government has grouped together all individual debts of no more than Rp 5 billion as SMEs debts, including credit card loans, consumer credit loans and loans owed by businesses linked to large companies.

This means that non-SMEs debtors could get softer repayment terms under a restructuring scheme, diverting initial government efforts to revitalize indebted SMEs only.

This potential unfair treatment has sparked resentment among the SMEs, who demand the government take out the non-SMEs debtors from the restructuring scheme, to ensure fairness in the matter.

Dispute has also occurred among top policy makers, causing sluggish deliberation in the drafting of the presidential decree.

Initially, the Office of the State Minister of Cooperatives and Small and Medium Enterprises proposed a draft stipulating that debtors be offered a 50 percent discount for a one-time cash settlement and 40 percent if they paid in installments within one year. Through the policy, the government expected that it could settle the problem of outstanding SME' debts to the government worth Rp 39.6 trillion.

The move has been strongly supported by some economists and prominent economic think tanks such as the National Economic Recovery Committee (KPEN), who argued that the SMEs have become the backbone of the national economy.

However, last March, Vice President Hamzah Haz challenged the debt reduction offer, favoring instead the rescheduling of the debts and if necessary the refinancing of selected SMEs.

His concern was reportedly supported by the International Monetary Fund (IMF), which questioned the impact of mass debt write-offs on the state budget.