DEN says govt may fail to meet IMF deadline again

DEN says govt may fail to meet IMF deadline again

JAKARTA (JP): Secretary of the National Economic Council (DEN)
Sri Mulyani Indrawati said on Tuesday that the government might
again fail to meet the deadline in the implementation of certain
key reform programs as promised to the International Monetary
Fund (IMF).

Sri, however, said that the delay in the reform measures, as
stipulated in the May Letter of Intent (LoI) to the IMF, was
"understandable" given the various challenges and complexities.

Sri said that in addition to the "extra work" by the
administration, the implementation of the crucial reform program
also required the cooperation of the legislative and judiciary
institutions.

"I think it will be difficult to implement the LoI without the
full cooperation of the legislative and judiciary institutions,"
she told reporters on the sidelines of a hearing session between
the council and House of Representatives Commission V for
industry and trade.

The National Business Development Council (DPUN) also
participated in the session.

The government's economic reform programs and the deadlines
for their implementation are contained in the LoI, which was
signed in mid-May.

The government failed to meet the reform deadlines as set in
the first LoI in January, prompting the IMF to postpone a second
disbursement of its bailout loan to the country.

A delay in the implementation of the LoI might again prompt
the IMF to delay the disbursement of a third loan tranche to the
country, which is set for August.

The delay in the IMF loan in May resulted in a serious blow to
market confidence and the exchange rate of the rupiah against the
U.S. dollar.

Sri said that of the 53 items in the LoI agreed between the
government and the IMF in May, there were several which would be
difficult to be realized by the set deadline.

She cited the handling of uncooperative debtors of the
Indonesian Bank Restructuring Agency (IBRA) as an example.

Sri said that the economics ministers and IBRA officials had
yet to adopt the same vision on how to deal with the recalcitrant
debtors.

"This is the most difficult obstacle to overcome. Maybe a
presidential decree is needed, because this (problem) cannot be
settled by the economics ministers alone," she said.

Coordinating Minister for the Economy, Finance and Industry
Kwik Kian Gie and Minister of Finance Bambang Sudibyo have both
vowed to take legal action, including asset seizure and
prosecution against the bad debtors, but so far no debtors have
been sanctioned.

Most of the debtors are well-connected businessmen, including
the children and friends of former authoritarian president
Soeharto.

IBRA has received some Rp 220 trillion worth of nonperforming
loans (NPLs) from the country's banking sector. The agency is
mandated to restructure and recover the NPLs.

IBRA's top priority, as stipulated in the LoI, is to focus on
the restructuring of its top 21 debtors, which owe a combined
debt of Rp 87.35 trillion.

According to the May LoI, IBRA must reach the stage of
finalizing the restructuring of term sheets or initiating legal
action against the uncooperative debtors for at least 35 percent
of the nominal loan value of the top 21 debtors by the end of
June.

The agency announced recently that it had reached an
Memorandum of Understanding to restructure 28.45 percent of the
Rp 87.35 trillion in loans, and to continue the litigation
process on 7.02 percent of the loans.

Sri said that the second most difficult reform program to be
implemented was a plan to introduce a body to oversee IBRA.

She said that it was difficult to find at least six people to
run the body who could work full time and were not influenced by
any political parties.

She said that the introduction of the body was initially meant
to insulate IBRA, which controls massive assets worth more than
Rp 600 trillion, from political intervention.

Sri added that the plan to introduce the body must be
evaluated thoroughly to ensure it would not instead hamper the
decision making process within the agency.

Meanwhile, head of DEN Emil Salim told legislators that IBRA
must further improve its transparency and accountability to avoid
massive political intervention.

He said this must be a top priority for the agency. (rei/cst)