Dropping debt extension plan the right thing: Analsysts

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.