Critics reacted negatively to Indonesian Bank Restructuring Agency's (IBRA) instruction to PT Holdiko Perkasa last week to sell by year's end 17 equity assets, with most considering it an irrational move that could result in a fire sale at a great loss to taxpayers.

Many are greatly concerned that speeding up the sale of these companies within such a short period of time would not only result in an unacceptably low recovery rate, but could also be a deceptive move to help the former owners (Salim) reacquire the companies at only a fraction of their actual market value.

The assets are the remainder of 108 operating companies ceded by the Salim Group to IBRA under a master of settlement and acquisition agreement in September 1998, to pay off the conglomerate's Rp 52.7 trillion (S$5.8 billion) debt to the government.

Holdiko is the holding company set up by IBRA to manage and eventually sell the assets and transfer all sale proceeds to IBRA.

IBRA Chairman Syafruddin Tumenggung did not explain the reasons behind his order to expedite the asset sale through only one-stage bidding, which will consist of eight steps: announcement of the sale, distribution of limited info memos, data room due diligence, management presentation, site visit, bid submission, bid evaluation and selection of the winning bidder and the closing.

But the master of settlement and acquisition agreement between IBRA and the Salim Group happens to end later this year. Moreover, Tumenggung has often hinted at plans to close IBRA much earlier than February 2004, when the agency's mandate is scheduled to end, and to close Holdiko's operations by December.

The great concern about disastrously low sale prices is legitimate, especially now when most investors are still jittery about Indonesia. But further delay could inflict even greater losses due to the worsening quality of the assets and lost opportunities to strengthen market confidence in the economy as a whole.

We also find it hard to believe that the assets, which are all ongoing concerns, could improve their performance under the management of Holdiko and the supervision of IBRA, which are both notorious for alleged corruption and collusive deals. On the contrary, the longer the assets are under these institutions, the worse their quality will be.

Tumenggung's firm decision to expedite the sale of the assets should therefore be welcomed as an important initiative to remove the companies as soon as possible from the state of limbo they are now in.

The problem is that as long as the enterprises remain under Holdiko and IBRA, it is not clear who really owns them; the two government entities or the creditors. Without a clear ownership status, these companies cannot regain access to bank credit lines, and without working capital loans these firms cannot operate at full capacity.

In the absence of a clear ownership status, the current management simply does not have any incentives to improve the companies' performance. Only after this issue is resolved will these enterprises have a good chance of undergoing real restructuring by new investors.

Certainly, assets that consist of plywood, textile and garments, vegetable oil and fat companies, property and industrial estate developers and a flour mill will not be able to fetch high prices, given the fragile condition of the economy and investor concern about legal certainty.

IBRA and the House of Representatives have even agreed on a range of 20 percent to 38 percent of book value as the highest recovery rates likely to be gained from the assets held by IBRA.

Holdiko and IBRA should be given the benefit of the doubt to push ahead with the expedited asset sale. As long as all the steps set for the one-stage bidding are conducted through an open, fair and competitive process and the bid prices submitted fall within the range of expected recovery rates, the transactions should be allowed to be finally closed before the end of the year.

But from the outset IBRA and Holdiko should open themselves widely to close scrutiny by the Oversight Committee and, if necessary, to a post-audit by the Supreme Audit Agency, in a bid to gain market confidence and political trust with the transactions.

A successful closing of the sale of the 17 companies would not only bring in revenue to the government and accelerate the restructuring of these businesses, but also improve investor confidence in the economy.