Experts question govt debt restructuring plans

Experts question govt debt restructuring plans

JAKARTA (JP): Experts criticized the government on Wednesday
for a lack of transparency in the multibillion dollar debt
restructuring plans designed for four large debtor conglomerates.

Centre for Strategic and International Studies (CSIS)
economist Hadi Soesastro said that the government should provide
a clear and complete explanation about the new restructuring
plan, including the criteria that make the companies eligible for
such a salvation.

"And if other companies can meet the criteria they must also
be allowed to have the same treatment to avoid the perception
that the measure is only for certain groups," Hadi said on the
sidelines of a seminar.

"It's politically such a big issue... I think this
(restructuring plan) is a government bailout," he said.

The Financial Sector Policy Committee (FSPC), which includes
several senior economic ministers, announced on Tuesday that it
had approved the debt restructuring plans made by the Indonesian
Bank Restructuring Agency (IBRA) for the Texmaco group, Tirtamas
group, paper company PT Kiani Kertas, which is controlled by
controversial timber tycoon Mohamad Bob Hasan, and Banten Java
Persada chemical firm owned by former minister of trade and
industry Jusuf Kalla.

Under the restructuring plan for Texmaco the government would
end up owning 70 percent of a new holding company, which will
control the 16 indebted companies under the Texmaco group, while
Texmaco founder Marimutu Sinivasan would retain a 30 percent
ownership.

Under the plan, all of the Rp 16.5 trillion (US$1.8 billion)
of Texmaco companies' debt owed to IBRA would be transferred to
the new holding company.

Texmaco initially owed the debt mostly to state banks but
after the debts went sour they were taken over by IBRA, a unit
under the finance ministry.

According to the plan, the holding company will issue
convertible bonds to IBRA, which sources said would mature in
eight years. The agency can sell the bonds in the secondary
market or can exchange them for Texmaco's assets upon maturity.

The government has yet to provide details about the structure
of the bonds.

Noted economist from the University of Indonesia Sri Mulyani
said that the debt restructuring plans were equal to a government
bailout and feared that it would create a new burden for the
future state budget.

"The government now holds the risk," she said on the sidelines
of the economic seminar.

Sri said that there was no guarantee that the companies
salvaged would perform sufficiently in eight years to be able to
repay the debt.

"And although some of the companies are running well, some are
in a very bad condition," she said.

The country's state budget is already heavily burdened by the
cost of the government bank restructuring program estimated to
reach more than Rp 650 trillion. The government has issued more
than Rp 642 trillion in treasury bonds to finance the bank
restructuring cost and the interest of the bonds will be covered
by the state budget.

The government must reduce the outstanding bonds to reduce the
burden of the budget and ensure fiscal sustainability.

IMF response

Meanwhile, the International Monetary Fund declined to comment
specifically on the Texmaco debt restructuring plan.

"What I can say is that the quality of the (debt)
restructuring is very important for future fiscal
sustainability," IMF Jakarta representative John Dodsworth said.

"The impact (of poor quality restructuring) will be felt on
the future budget," he added.

IMF Asia Pacific deputy director Anoop Singh also declined to
comment. "I can't comment now. We'll make a review at the end of
this month."

The IMF is providing the country with a multibillion dollar
bailout package to help finance the country's economic reform
programs. The IMF will have to review the program first before
disbursing any bailout loans.

Separately, Coordinating Minister for Economy Rizal Ramli, who
is also chairman of the FSPC, dismissed suggestions that the
restructuring plans for Texmaco and the other three large debtor
companies was a government bailout on private sector debts.

"It is a normal restructuring deal and we want to minimize
losses as much as possible," he told reporters.

Rizal said that the government wanted to move as quickly as
possible to restructure the debts of companies under IBRA to
prevent further losses and the maximize asset recovery.

He added that by restructuring the companies, they would
continue to stay afloat, generating steady cash flows and
maintaining their large employment.(rei)