Debt payment still required

Japanese banks, in an effort to prevent greater difficulties, are reported to have written off about US$1.5 billion worth of bad loans made to private Indonesian companies. This, however, does not mean that the Indonesian companies have been absolved from their obligation to pay, which must still be done as usual in normal debtor-creditor relationships.

The practice of writing off bad loans is essentially meant to improve the creditor bank's own standing, because the presence of bad credits in large amounts will adversely affect a bank's business and soundness.

Indonesian debtors must realize that the Japanese banks still have the responsibility to keep trying to have all those outstanding loans repaid since writing them off would only mean moving them from the balance sheet into the banks' administrative accounts.

We are certain that Japanese banks are still highly committed to helping Indonesian entrepreneurs. On the other hand, the trust that is being given by those Japanese banks should be respected by their Indonesian partners in business. As creditors, Japanese banks will always be considering the quality of the loans they are extending to Indonesia. The possibility is thus always present that, at some time in the future, those Japanese banks will compile a blacklist of companies which are likely to default on their loans.

Conversely, if there is a large enough number of Indonesian debtors who behave well and fulfill their obligations without any fault, then those same Japanese banks will certainly not hesitate to give us a positive recommendation to foreign banks, and recommend that they follow a similar policy (of writing off loans to Indonesian private companies).

The Japanese policy of writing off those loans will give Indonesian companies a welcome breathing spell as they try to put their cash flows in order so that, in time, they will be able to pay off their debts to their creditors as required. We hope the Japanese example will be followed by creditor banks in other countries.

-- Bisnis Indonesia, Jakarta