Finance minister hopes for annulment of Prudential bankruptcy verdict

Abdul Khalik and Urip Hudiono, The Jakarta Post, Jakarta

Minister of Finance Boediono hopes the Supreme Court will annul the bankruptcy ruling against PT Prudential Life Assurance on the grounds that the company was a solvent entity with a solid financial performance.

He said the bankruptcy ruling could further harm the country's investment climate and confidence in the insurance sector.

"We will wait for the Supreme Court ruling, because the legal process is still underway. We hope they can come up with a favorable decision for Prudential," said Boediono.

Prudential is 94.5 percent owned by British insurance company Prudential Assurance Company Ltd.

The Central Jakarta Commercial Court declared Prudential bankrupt on Friday after a former agent, Malaysian Lee Boo Siong, filed a bankruptcy suit on April 7, accusing the company of failure to pay him bonuses amounting to Rp 366 billion (US$44 million).

Prudential, which closed its offices temporarily on Monday, has appealed to the Supreme Court.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti also warned that the bankruptcy verdict against Prudential would hurt foreign investment in the country.

Meanwhile, chairman of the Indonesian Insurance Council, Hotbonar Sinaga, said the council had to respect the court decision and would wait for the result of the appeal.

"The court must also remember that the company has around 9,000 employees. We hope that the Supreme Court will consider this when it makes the decision," said Hotbonar.

He added the Prudential case pointed to the weakness of the existing Bankruptcy Law No. 8/1998, as a solvent company could be declared bankrupt upon a petition filed by a single creditor.

"We will push the House of Representatives to amend the law as soon as possible," he said, and that the council had proposed that the Ministry of Finance have the final say in dissolving an insurance company.

The ministry also made a similar proposal last year following the high-profile Manulife case.

In 2002, the commercial court declared PT Asuransi Jiwa Manulife Indonesia, a unit of Canada's Manulife Financial Corp., bankrupt in a legal dispute with a former Indonesian shareholder. The Supreme Court overturned the ruling following protests from various parties, including the Canadian government.

The British Embassy in Jakarta has also criticized the bankruptcy ruling against Prudential.

Meanwhile, senior legislator Paskah Suzetta said the House had already received a draft amendment to the bankruptcy law, but he implied that Minister of Justice and Human Rights Yusril Ihza Mahendra lacked seriousness in discussing the matter.

"Yusril has refused to speak with us about the amendment. We can't do anything about the draft unless he comes and talks," said Paskah.