Government acts to expedite debt restructuring

Government acts to expedite debt restructuring

JAKARTA (JP): The Jakarta Initiative Task Force will hire 20
foreign experts in June in a bid to accelerate the process of
restructuring the country's US$67 billion corporate overseas
debt, according to chief operations officer Joseph Luhukay.

"We are running against time to prevent our economy from going
bankrupt," he told reporters on Thursday at a discussion on debt
restructuring and the Jakarta Initiative.

The Jakarta Initiative Task Force was set up last September
with the support of multilateral donors to facilitate the
renegotiation of debts between debtors and creditors and
encourage out of court debt settlements.

The task force has around US$35 million to finance the two-
year program.

Joseph declined to mention the cost of hiring the foreign
experts, but admitted it would be expensive.

"They used to get a fee of between 1 percent and 2 percent,"
he said.

"But they're experienced people and can come up with a
(restructuring) solution to a debt case just by smelling it.
They also have good access to international lenders like Chase
Manhattan Bank," he said.

Restructuring the country's private sector overseas debt is
seen as a key step towards economic recovery.

Of the total $67 billion debt, around $24 billion falls due
this year. If the debt is not restructured, the demand for
dollars will remain high, bringing further pressure to bear on
the rupiah. With foreign exchange reserves currently somewhere
between US$15.5 billion and $16 billion, Bank Indonesia would be
hard pressed to defend the rupiah in the face of any sustained
pressure in the money markets.

Joseph said the Task Force had been able to facilitate both
restructuring agreements and standstill agreements on some $2.6
billion and Rp 1.9 trillion in foreign and domestic debts.

He added that the Task Force was currently facilitating debt
renegotiations involving 181 companies with foreign and domestic
debts of $20.8 billion and Rp 11.6 trillion respectively.

"Seventy indebted companies are also waiting for help outside
our door," he added.

Joseph said that many foreign creditors were initially
doubtful about the Jakarta Initiative, but had now started to
show an interest.

"Between 65 percent and 75 percent of the cases we're now
facilitating are being pushed in by creditors," he pointed out.

Joseph, however, admitted that debt restructuring had been
progressing slowly.

He attributed this to a lack of transparency on the part of
debtors and to an unrealistic expectation that the government
would bail them out.

"This is slowing down the whole debt renegotiation process,"
he said.

He added that many local companies had insisted on foreign
creditors providing them with working capital once debt
restructuring agreements had been reached.

"But that depends on whether foreign creditors trust their
local debtors," Joseph added.

"What we need is transparency from both creditors and debtors,
just like when you go to a doctor and you have to tell him
everything about yourself, including your habits and medical
history," he said.

"But we do hope that foreign lenders will start providing
local companies with sorely-needed working capital," Joseph
added. (rei)