'Debt extension not for bad debtors'
'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.