'Debt extension not for bad debtors'
Berni K. Moestafa, The Jakarta Post, Jakarta
The government said it would exclude uncooperative debtors from a plan to offer debtors a longer debt payment period, in a further sign that it is bowing to pressure from the public calling the plan unfair.
Coordinating Minister for the Economy, Dorodjatun Kuntjoro- Jakti said that revising the debt deals should help improve efforts to recoup public funds from large debtors.
"However, debtors who show a lack of good faith in settling their debts, will not be offered that chance," Dorodjatun said in a statement as quoted by Antara on Monday.
He spoke to participants at the World Economic Forum in New York on Saturday.
His statement came as a team of the International Monetary Fund (IMF) arrived last Thursday on a two-week visit to discuss, among other things, the debt extension plan.
The team's leader IMF senior advisor for the Asia Pacific department, Daniel Citrin suggested the government get tough on bad debtors, as he said legal certainty was key to this issue.
Legislators, banking analysts and legal experts have been urging the government to prosecute uncooperative debtors.
The debtors are former bankers who owe the government some US$13 billion in liquidity support loans their banks were believed to have abused.
In 1998, the first batch of these bankers agreed to a four- year debt payment program to avoid a court settlement.
But more than three years into the program most had been evading payment -- a situation that makes the debtors liable for prosecution.
In charge of recouping the lost liquidity loans, and turning uncooperative debtors over to the courts is the Indonesian Bank Restructuring Agency (IBRA).
IBRA officials have admitted their failure to accomplish both tasks, but blame it on an unfavorable business climate hampering payments, and the weak judicial system.
As a way around the problem, IBRA proposed last year the debt extension plan, which gained the backing of senior economic ministers.
Under the plan, debtors may get up to 10 years grace period and effectively lower interest payments, as the interest rates are no longer tied to Bank Indonesia's still soaring benchmark rates.
"The idea of revising debtors' contracts stems from the reality that most who signed the contracts have not met their obligations," Dorodjatun said.
But the plan was greeted by public criticism, with critics questioning the government's sense of justice amid widespread economic hardship made worse by its recent decision to hike fuel and power prices.
Several ministers were reportedly also against the idea, forcing the government to set up a small team to review it.
The team is slated to wrap up its review by mid February, or at about the same time the IMF team will be leaving Jakarta.
Citrin's call for legal certainty is congruent with what the government had promised the fund in its lending agreement better known as the Letter of Intent (LoI).
Under the December signed LoI, the government expects IBRA to make more use of its legal powers to force debtors into paying.
Complying with the contents of the LoI is a prerequisite for obtaining the fund's financial aid.
Antara reported that Dorodjatun planned to meet the IMF and the World Bank in Washington on Monday.