Dialog sought for BLBI asset recovery: Economist

M. Taufiqurrahman, The Jakarta Post, Jakarta

The Ministry of Finance, Bank Indonesia and the Indonesian Bank Restructuring Agency (IBRA) must work together to resolve the protracted dispute on who should cover the huge financial losses resulting from bailing out banks in the past, an economist said.

Economist Faisal Basri said that since negotiations started a couple of years ago, no agreement had been reached as to how much money could be recovered.

"Each institution might have their own idea about the amount of assets to be recovered, but at the end of the day, they must hold a dialogue and set a common standing on how much they can recover," he told The Jakarta Post.

The central bank, at the request of the finance ministry, channeled Rp 144.5 trillion (US$16.23 billion) in Bank Indonesia liquidity support facility (BLBI loans) in the late 1990s to help ailing banks deal with massive runs, but a large part of the loans was abused by borrowers.

IBRA, set up in 1998, is mandated to recover the loans, and has received promissory notes and corporate guarantees issued by the borrowing banks and their owners.

IBRA Chairman Syafruddin Temenggung reiterated on Thursday the fact that the promissory notes and corporate guarantees were not backed up with sufficient collateral, and that the assets were only worth around Rp 12 trillion, as audited by the Supreme Audit Agency (BPK).

This means the recovery rate of the BLBI loans would only be around 18.3 percent, compared to 70 percent as targeted by the government.

Syafruddin said that the agency should not be faulted for the low recovery rate, because it was Bank Indonesia that had channeled the loans without securing sufficient collateral.

The finance ministry and the central bank are currently engaged in talks facilitated by the House of Representatives on who should share the burden of financial losses resulting from the BLBI loans.

Syafruddin demanded that IBRA be included in the talks.

Separately, University of Gadjah Mada economist Revrisond Baswir said that IBRA's complaint came too late, as the agency would soon be disbanded.

"This shows, however, that the government still has a long way to go after the dissolution of IBRA, before it can achieve a settlement of the abused loans," he told the Post.