Debt extension plan review waste of time, economist says
Dadan Wijaksana, The Jakarta Post, Jakarta
Rather than setting up a special team of senior ministers to review the controversial policy to ease repayment terms of indebted ex-bank owners, the government should instead focus on how to execute the original debt settlement scheme, says an expert.
Didik J. Rachbini, an economist at the Institute for Development of Economics and Finance (Indef), said the setting up of a review team was waste of time and only illustrated the government's failure to identity the heart of the problem.
"We do not need the team. If they (debtors) have proven uncooperative, let them accept all the consequences. If that means seizing their assets, then do it," Didik said on Saturday.
President Megawati Soekarnoputri formed the interministerial team on Jan. 19 to review the much-criticized government policy to grant debt payment extensions to and lower interest rates for former bank owners owing huge debts to the Indonesian Bank Restructuring Agency (IBRA).
The team is expected to complete its job in the middle of next month. In addition to senior economics ministers, the team also includes the coordinating minister for security, the attorney general and the National Police chief.
The ex-bankers owe around Rp 144.5 trillion (about US$14 billion) to the government after their banks received massive liquidity support at the height of the 1997 financial crisis.
In 1998, the government reached agreement with the former bank owners for the latter to repay the debts within four years. The businessmen also agreed to transfer assets to IBRA as part of their debt payments.
But to date, most of the debtors have not started making payments, and many of the assets transferred had either been pledged to other creditors or their market value was far from sufficient to cover their debts.
The government then announced on Dec. 11, 2001 that it would ease the repayment terms to enable the ex-bankers to repay the debts.
This has put the government under public scrutiny, with critics claiming the government is impotent against large and politically well-connected debtors when it comes to forcing the reluctant debtors to return the funds.
With the debt extension plan, the debtors would be tempted to become even more lax in meeting their obligations, therefore, legal proceedings should be what they face at the moment, he said.
Didik was of the opinion that the government had no other alternative but to take legal action against debtors who failed to make payments.