Economists say no to force majeure proposal

Economists say no to force majeure proposal

JAKARTA (JP): Economists have dismissed the private sector's
call for the government to declare the economic crisis a force
majeure, saying it would be a vain attempt at getting away from
repaying their debts.

Mari Pangestu, the executive director of the Centre for
Strategic and International Studies (CSIS), said here yesterday
the business sector was reacting to severe pressure from highly
inflated debts and that current solutions had not benefited them.

"They're desperate. They can't find a solution to their debt
problems," she told The Jakarta Post.

Mari said it would be very hard for them to justify the
declaration of a force majeure. In doing so, they would have to
prove that they have tried everything to save their businesses
and that what had happened to them was beyond their control.

A group of business executives demanded both President B.J.
Habibie and Supreme Justice Sarwata on Thursday to declare the
economic crisis a "national calamity".

They cited the gloomy prediction that the country's economic
growth would shrink to minus 20 percent this year from 7 percent
in 1997, the fact that the whole region had been affected by the
crisis, the ailing banking sector and the closing down of many
companies as some of the factors contributing to the calamity.

The disaster, they argued, had hit all businesses, even those
which had managed their operations prudently prior to the crisis.

Benny Sindunata, an executive of the Indonesian Business Data
Center, said yesterday the government was unlikely to declare a
force majeure because it would only further hurt the economy.

"A force majeure (declaration) would benefit the business
sector, but would crush the banking sector," Benny told the Post.

Benny said declaring a force majeure would not yield positive
results to the companies seeking to be exempted from repaying
their debts.

"There would no longer be fresh money circulating," he said,
adding that such a scenario would put an end to normal business
transactions because of fears that credits would never be repaid.

A force majeure usually denotes a natural disaster, severe
fires and major accidents.

The monetary crisis, he said on the other hand, was very
complex.

"Their argument that the crisis is a force majeure is not
accurate because the monetary crisis was created by many factors,
including political and international ones."

Mari said debtors and creditors should find other options to
solve their debt problems because the declaration of a force
majeure would only further taint the country's already battered
image in the international community.

She said such a declaration would undermine the Indonesian
Debt Restructuring Agency's (INDRA) and soon-to-be-established
bankruptcy court's ability to function.

INDRA was set up by the government to help the private sector
settle its foreign debts over an eight-year period, including a
grace period of three years. Participants of the program are
allowed to make debt payments to the agency at lower exchange
rates.

Mari said most companies still regarded the current exchange
rate as unaffordable, although the agency promised to fix the
exchange rate at lower than market rates.

The rupiah has lost over 80 percent of its value against the
U.S. dollar since last July.

The private sector has also complained that the new bankruptcy
law is only beneficial to creditors, Mari added. (das)