Divestment delay 'won't hurt' IMF ties

JAKARTA (JP): The delay in the country's key bank divestment program would not hurt relations with the International Monetary Fund (IMF), according to a senior government official.

Chairman of the National Development Planning Board (Bappenas) Djunaidi Hadisoemarto reasoned that the decision to delay the divestment program was made by the legislative branch, thus beyond the control of the government.

The government agreed on Thursday with the House of Representatives to delay the divestment of publicly listed Bank Central Asia (BCA) and Bank Niaga.

The delay was made on grounds that selling the two banks now would result in less than optimum proceeds due to the current unfavorable condition.

"We don't agree having the country's best assets sold quickly at a low price," said legislator Theo Toemion during consultations with the government on the bank divestment plans. Most legislators insisted the government delay the sale until market conditions improve.

Djunaedi was commenting on the concerns raised by the IMF earlier on Friday that Indonesia's decision to delay the sale of BCA and Bank Niaga could further hurt investor confidence in the government's drive to sell state-owned assets.

"This is really a setback for restructuring assets," IMF chief representative in Indonesia John Dodsworth was quoted by Dow Jones Newswires as saying.

Indonesia had committed since February under its U.S.$5 billion IMF program to sell the banks, which would have signaled the country was serious about cleaning up the debris from the banking sector collapse, Dodsworth added.

"It would have given a major boost to market sentiments. Now we're not going to get that boost," he added.

"The sale of BCA has been a major policy commitment not just in the latest Letter of Intent (LoI) but in successive LoIs since February so to hear that it has been postponed is extremely disappointing," Dodsworth told Reuters separately.

The government nationalized BCA and Bank Niaga last year and put them under the Indonesian Bank Restructuring Agency (IBRA) in a bid to save the two banks from bankruptcy due to the financial crisis.

The delay risks never selling any assets and leaving IBRA burdened with more than Rp 600 trillion ($68.18 billion) worth of assets and nonperforming loans from failed banks, Dodsworth said.

Dodsworth cautioned that the slow pace of debt and bank restructuring could affect the stance of foreign donors to Indonesia at a meeting in Tokyo from Oct. 17 to Oct. 18.

"Clearly there will be an assessment by foreign donors of the restructuring process," he said.

Indonesia is expecting to raise $4.8 billion from its donors to help plug a massive budget deficit.

IBRA hopes to raise Rp 18.9 trillion this year for the state budget but has so far only raised Rp 12.5 trillion.

IBRA said earlier it expected to raise Rp 1.78 trillion ($202.7 million) from selling its shares in BCA and Rp 140 billion from the sale of Bank Niaga.

An IMF team is expected to arrive in Jakarta on Oct. 27 for 10 to 12 days to discuss Indonesia's progress in its latest reforms.

Meanwhile, Coordinating Minister for the Economy Rizal Ramli criticized on Friday the IMF and the World Bank for being discriminatory in their judgment over the debt restructuring deal between the giant textile and engineering conglomerate Texmaco group and IBRA.

"Why has the IMF (and World Bank) only questioned the Texmaco deal. Why don't they also question the others, including the Salim group," Rizal told reporters.

The Salim group is the founder of BCA which owes the government some Rp 53 trillion but has only surrendered assets worth around Rp 20 trillion under a deal made with the previous administration. The current government has demanded the Salim group inject additional assets.

"I demand the World Bank and the IMF not to be discriminatory," Rizal said.

The Financial Sector Policy Committee (FSPC), the highest policy-making body for IBRA that Rizals chairs, approved on Monday the debt restructuring deals for Texmaco, Tirtamas, Kali Manis and Banten Java Persada business groups worth more than $3.7 billion.

He added that unlike the other conglomerates which owed huge debts to the government, Texmaco had been cooperative with the government in settling its obligations and had surrendered quality assets.

The IMF and World Bank had earlier urged the government to review the $2.7 billion debt restructuring deal with Texmaco, saying it should seek a second opinion from international consultants.

In a letter dated Sept. 29 to Rizal, a copy of which was obtained by Dow Jones, the two bodies warned the debt restructuring plan for Texmaco could set a bad precedent.

But Dodsworth who co-signed the letter with World Bank counterpart Mark Baird, said it wasn't the fund's policy to comment on individual debt restructuring plans.

However he said it was important to have a level playing field for restructuring the debt.

Under the restructuring plan, the Texmaco debts would be transferred into a new holding company that would control the assets of the group. The holding company would issue exchangeable bonds to IBRA, which would hold a 70 percent stake in the holding company with the remaining 30 percent in the hands of Texmaco founder, Marimutu Sinivasan. The government could sell the bonds to the secondary market or they could be exchanged with the Texmaco assets surrendered as collateral when the bonds mature. (rei)