'Deal to release IBRA debtors invalid'

The Jakarta Post, Jakarta

A four-year old deal to drop criminal charges against debtors if they repay trillions of rupiah in state loans they abused contradicts the law and should be declared void, experts say, but predicted the government would not likely retract the deal.

They said the government now appeared reluctant to drop the criminal charges, as it knew the 1998 deal was legally invalid from the beginning.

"The concept was wrong from the onset. The law separates civil law matters from criminal law matters, the debt settlement deal however mixes the two," said lawyer Luhut Pangaribuan over the weekend.

Known as the shareholders settlement program, the agreement was made in an attempt to recoup some Rp 138 trillion (about US$15.3 billion) in Bank Indonesia liquidity loans from former bankers who misused the funds following the 1997 economic crisis.

Under a release and discharge clause, the government would drop criminal charges, including one on violating banking regulations, if the ex-bankers agreed to repay the abused loans.

But even as the deadline for most of the debtors expires this year, payment has been minimal. There is also suspicion of them regaining control over assets they had surrendered as part of the debt repayment to the Indonesian Bank Restructuring Agency (IBRA).

Controversy over the settlement program came back to life on plans to drop criminal charges on the first batch of debtors.

Last week, the People's Consultative Assembly Speaker, Amien Rais urged the government to cancel the plan and instead sue the former bankers.

The government is now caught between whether to go ahead with the widely unpopular move or to undermine its credibility and bow to public pressure to cancel the agreement.

Finger pointing among officials over who should sign the release and discharge clause, cemented suspicion that the debt settlement program should not have been signed in the first place.

"They (the government) don't want to sign now, as they know the deal was born from a compromise with debtors," said banking analyst Mirza Adityaswara.

The settlement program involves some of the country's largest and most influential business tycoons, many of whom still have links to the political establishment.

IBRA's stance to go tough on recalcitrant debtors softened when it dismissed earlier this year suggestions by a team of lawyers to pursue legal actions against them.

But annulling the release and discharge clause altogether may not be the right choice, according to Luhut who is a member of the government-appointed team.

"It would be a setback if the government cancels the deal, it would make the government look inconsistent," he said.

Mirza agreed, saying that ex-bankers who did repay their debts should be let free.

This may include former Bank Subentra owner Sudwikatmono and former Bank Risyad Salim International owner Ibrahim Risyad, for whom, along with two others, IBRA recommended last week the release and discharge clause.

But while IBRA claim some debtors have kept their part of the deal, legal experts have long noted the settlement program was unfair to the government.

"The recovery rate on the sale of their (ex-bankers') assets is questionable," said economist Dradjad Wibowo. "Proceeds from the sale of Salim's assets are short Rp 13.1 trillion, and the shortfall of Sudwikatmono's and Ibrahim Risyad's asset sales may reach between Rp 1 trillion to Rp 1.9 trillion."

He said the government should verify the repayments once again before letting the ex-bankers go.

The International Monetary Fund (IMF) has urged the government to maximize the recovery rate, warning the public would bear the brunt of any shortfalls.

Every year, some Rp 50 trillion in tax payers money is spent on paying interest rates on government bonds that were issued to cover part of the loans bankers had abused.