'Debt extension plan will prolong IBRA's mandate'

The Jakarta Post, Jakarta

The controversial policy of the powerful Financial Sector Policy Committee (FSPC) to ease the repayment terms for the huge debts owed by former bank owners implies that the life of the Indonesian Bank Restructuring Agency (IBRA) would have to be extended for at least another six years, according to State Minister for National Development Planning Kwik Kian Gie.

"The decision of the FSPC ... implicitly implies that the existence of IBRA will be prolonged. Can the FSPC make such a crucial decision?" Kwik said on Wednesday during a hearing on the debt extension plan with House of Representatives Commission IX on financial affairs.

IBRA, which first proposed the new debt settlement scheme, is supposed to end its six-year mandate in 2004.

The FSPC, which groups senior economic ministers led by Coordinating Minister for the Economy Dorodjatun Kuntjoro-Tjakti and has the final say on major debt restructuring policies, decided late last year to extend the repayment period for the debts from four to ten years with interest rates being lowered to a minimum of nine percent.

But the policy has raised controversy as critics said that the government was being soft on bad debtors. The government injected more than Rp 138 trillion (about US$413 billion) in bailout funds in the wake of the 1998 financial crisis to help the banks stay afloat.

The government has discussed the FSPC policy at several cabinet meetings but has failed to reach a final conclusion. Three senior ministers have been assigned to review the policy.

Kwik has been a strong critic of the FSPC policy on the debt extension plan.

Elsewhere, Kwik also expressed his doubts about the authenticity of an intelligence document, circulated by IBRA chairman I Putu Gede Ary Suta at a cabinet meeting, which supported the agency-proposed debt extension plan.

The report, reportedly drafted by the National Intelligence Body (BIN), said the debt settlement scheme would benefit the economy as a whole, as it would allow companies to keep operating and generating income, while at the same time creating job opportunities.

But Kwik said that the report did not carry the signature of BIN's chief Hendroprijono.

Press reports had earlier quoted the BIN report as saying that the debt extension plan could trigger social unrest as it ran contrary to society's sense of justice.