Dropping debt extension plan the right thing: Analsysts

Dadan Wijaksana, The Jakarta Post, Jakarta

Analysts welcomed the government's decision to reject a controversial plan for allowing debtors under the Indonesian Bank Restructuring Agency (IBRA) extra time to meet repayments, saying the move respected the public's sense of justice.

Legal expert Todung Mulya Lubis and Citibank economist Anton Gunawan agreed that applying a hard-line approach against the politically well-connected debtors was the right stance.

"The decision is clearly a better solution than the extension plan. It's about time these uncooperative debtors get what they deserve," Todung told The Jakarta Post on Thursday.

Anton concurred by saying: "I warmly welcome the decision as stern action from the government is what we need right now to deal with the debtors."

Earlier on Thursday, the government decided to scrap an IBRA proposed plan to extend the shareholders debt settlement program period by up to a maximum of ten years.

The recalcitrant debtors owe the government a staggering US$13 billion.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said that IBRA must stick to the original contracts, adding that debtors had three months to meet their obligations.

If they refuse to start paying up, the government may sue them for bankruptcy and seize their assets, among other possible options.

The debt scheme was first agreed to in 1998 between IBRA and the 33 former bankers whose banks the government bailed out from the financial crisis.

Under what is known as the shareholder settlement program, debtors have up to four years to settle their debts, a deadline which for many debtors falls this year.

The program serves as an umbrella agreement for three payment schemes set up respectively under Master of Acquisition and Settlement Agreements (MSAA), Master of Refinancing and Notes Issuance Agreements (MRNIA) and Deeds of Indebtedness, better known as APU.

But the failure to get any repayments under these schemes prompted IBRA to propose extending the program deadline by up to 10 years.

Critics have hit out at the IBRA plan, charging there was no guarantee the debtors would start paying even if their repayment period was extended.

But Todung and Anton warned that it was not enough to simply rely on the old payment schemes.

Both stressed the need for filtering cooperative debtors from uncooperative ones, that is those who have neglected to make payments, namely the bulk of the debtors under the program.

"For debtors considered to have met their obligations, we should respect their rights," Anton said, explaining that they should be released from all legal charges as agreed under the program.

So far, however, only the Salim Group is said to have complied with its MSAA after surrendering some Rp 52 trillion worth of assets to IBRA.

Anton added that the government should also beef up its legal powers so as to be able to confront bad debtors in court.

"They would certainly look for legal loopholes and the government should be ready for this. We do not want this to end with the government losing in the courts."

But the risk of loosing is high given the current corrupt legal system.

IBRA's poor track record in three years of trying to force bad debtors to pay up through litigation should serve as an example.

The agency has said that out of some 230 court cases it brought, it has been mainly on the loosing side.

Elsewhere, the International Monetary Fund (IMF) reportedly has also praised the decision to drop the debt extension plan.