Debt payment still required

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