Conflicting interests leave govt decree on SMEs in limbo

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.