Economic reform target dates

Economic reform target dates

The following is the target dates for Indonesia's economic
reform package under the latest agreement between the government
and the International Monetary Fund.

Box 1. Updated Financial Sector Reform Agenda

I. Loan collection and asset recovery

1. State banks and AMU

* Complete setting monthly asset collection targets
for all banks. Target date: June 30.

* Identify and publicly invite 20 largest consolidated
nonperforming borrowers of each state and IBRA bank
and the AMU for negotiations. Status: Initiated

* Develop resolution strategies for largest borrowers. Target
date: June 30.

* Take appropriate legal actions against recalcitrant
borrowers. Target date: August 30.

2. IBRA

* Draw up quarterly timetable for the resolution of AMU
and other assets through March 2000. Target date: June 30

* Complete classification of assets by resolution strategy
(sale, foreclosure, or negotiated restructuring). Target date:
June 30

* Complete transfers of shareholders' assets from 1998 BTO
and BBO banks to holding companies. Target date: June 30

* Begin retaining private sector specialists to assist
with loan recoveries. Target date: June 30

II. State Bank and IBRA Banks restructuring

1. Bank Mandiri

* Implement voluntary severance scheme for staff of
component banks. Status: On track; to be completed by March 31,
2000.

* Establish centralized treasury unit and credit
function. Status: Treasury already centralized; large corporate
credits to be centralized by end-May.

* Include international bank in management of loan
recovery, and sign performance contracts with top
management, incorporating collection targets. Target date: May 28.

* Recapitalize Bank Mandiri in line with progress in
operational and financial restructuring. Target date: May 1999-March
2000.

2. Other state banks (BNI, BRI, and BTN):

* Strengthen top management. Status: Underway

* Engage international firms to provide management
and advisory services. Target date: June 30.

* Include international bank in management of loan
recovery. Target date: June 30.

* Prepare business plans, in consultation with advisors. Target
date: August 15.

* Sign performance contracts with top management. Target date:
August 30.

* Recapitalize in line with progress in restructuring. Target
date: Sept. 1999-March 2000.

3. Original BTO banks (BCA, Danamon, PDFCI, Tiara)

* Finalize acceptable business plans for all four banks. Target
date: June 30.

* Sign performance-based management and regulatory
contracts for BCA and Danamon. Target date: July 15.

* Legally merge PDFCI into Danamon. Target date: July 31.

* Operationally merge PDFCI into Danamon. Target date: September
30.

* Resolve Bank Tiara. Target date: After midyear.

* Offer BCA and Danamon for sale. Target date: By March 2000.

4. New BTO banks (March 13)

* Commence negotiations for settlements of connected
lending with former controlling shareholders. Target date: May 28.

* Remove majority shareholders rights. Status: Effectively done.

* Develop least cost resolution strategies, excluding
stand-alone recapitalization. Target date: July 31 .

III. Private bank restructuring

1. Recapitalization of viable private banks

* Settle eligible interbank claims. Target date: May 28.

* Sign recapitalization agreements. Target date: May 28.

* Issue government bonds to banks whose private owners
have provided their necessary capital share on original
estimates. Target date: May 28.

* Issue additional bonds to complete recapitalization to
the amounts specified in the updated financial reviews
by international auditors together with additional
private capital. Target date: June 30.

2. Comprehensive review of A category banks

* Ensure that all owners, managers and directors of
A-category banks conform to the fit and proper test. Target
date: July 31.

* Take appropriate action against individuals who have
failed the fit and proper test (by violating laws or
BI regulations). Target date: July 31.

* Complete review of business plans. Target date: May 28.

IV. Legal, Regulatory, and Supervisory Framework

* Establish the Independent Review Committee for IBRA. Status:
Done.

* Sign implementing regulations for Banking Law
amendment. Status: Done.

* Complete strategic plan for strengthening BI's
regulatory, supervisory, and examination activities. Target date:
June 30.

* Complete detailed review of banking law and
regulations. Target date: Sept. 30.

* Issue new prudential regulations on commercial banks,
foreignbranches, license revocation and bank
liquidation. Target date: Sept. 30.

* Complete diagnosis of the offsite supervision system. Target
date: Sept. 30.

Box 2. Loan Recovery Strategy for the 20 Largest Nonperforming

Borrowers of Each of the 7 State Banks, the 12 IBRA Banks,
and IBRA's AMU

Institutional framework (May 1999)

* Establish loan recovery unit in each bank and start
setting monthly recovery targets.

* Intensify loan collection efforts focused on the 20
largest borrowers of each bank.

* Establish interagency committee chaired by Ministry of
Finance on loan recovery to ensure consistent and
coordinated approach to loan recovery and restructuring.

* Complete transfer of all loan documentation (on
transferred assets) to IBRA.

* Sign agreement between IBRA and state banks regarding
custodian role for original collateral document.

Development of strategy (May 1999)

* Identify and complete documentation of 20 largest
borrowers by each bank.

* Consolidate accounts by borrowing group.

* Classify groups into one of four categories based on
financial prospects and expected degree of cooperation, and
differentiate resolution strategy accordingly.

* Finalize monthly loan recovery targets for each bank and
the AMU.

* Prioritize cases by size of group debt.

Implementation of strategy

June 1999

* By June 1, publicly invite borrowing groups to resume debt
service or agree to start negotiation within two weeks.

* Form creditor committees, with external creditors, in
accordance with Jakarta Initiative.

* Recommend stand still, when appropriate.

* Appoint financial advisors, auditors, and legal advisors
to help develop strategies.

* Start due diligence.

* Publish names of borrowing groups who do not cooperate.

* Start restructuring negotiations.

August 1999

* Establish timetable for remaining steps of debt
negotiation or take appropriate legal action (including
bankruptcy filings) for non-cooperating borrowing group.

* Review strategy with the IMF, World Bank, and the ADB.

* Repeat above strategy for the next 20 largest nonperfoming
borrowers of each bank.

Box 3. Updated Corporate Restructuring Agenda

* Issue consolidated Directorate General Circular on tax
treatment of corporate restructuring and Ministry of Finance
decree on tax treatment of land/buildings transfer. Target date:
May 28.

* Conduct high-level meeting of member agencies of one-stop
facilitation process, formulate overall strategy, and
establish rules and procedures for approval of regulatory
filings. Status: Initiated

* Complete conditions for effectiveness of World Bank
technical assistance loan. Target date: May 28.

* Retain at least 20 facilitators for Jakarta Initiative
Task Force (JITF). Target date: June 30.

* Submit to Parliament arbitration and secured transactions
laws. Status: Done

Box 4. Updated Bankruptcy Reform Agenda

* Sign into law new anti-KKN (corruption, collusion and
nepotism) legislation. Target date: May 28.

* Issue decrees and regulations to implement law. Target date:
June 30.

* Issue Steering Committee's proposed procedures for
assignment of ad hoc judges to actual cases before
the Commercial Court. Target date: June

* Implement judicial salary proposal of the Commercial
Court Steering Committee. Target date: June