Government warned against excessive interference in IBRA

Government warned against excessive interference in IBRA

JAKARTA (JP): Economists warned the government on Saturday
against excessive interference in the management of the
Indonesian Bank Restructuring Agency (IBRA) following the placing
of the key agency under the supervision of State Minister for
State Enterprises Laksamana Sukardi, a confidant of President
Megawati Soekarnoputri.

"Can IBRA now act independently? A minister will be directly
involved ... It will give rise to unhealthy perceptions," Centre
for Strategic and International Studies (CSIS) economist Pande
Radja Silalahi told The Jakarta Post.

On Sept. 13, Megawati signed two decrees: Number 63/2001 and
64/2001 on the transfer of authority over IBRA and the country's
state-owned enterprises from the finance ministry to the Office
of the State Minister for State Enterprises.

With the new decree, Laksamana will also have the right to
appoint and dismiss key IBRA people.

The government has argued that the transfer was needed to
reduce the work load of the finance ministry and to improve
efficiency as the privatization program being carried out by the
Office of the State Minister for State Enterprises was basically
similar to IBRA's asset sale program.

IBRA controls assets worth around Rp 600 trillion (US$66
billion) which were transferred from former bank owners, and
closed and troubled banks. Since its establishment in early
1998, the agency has often been the target of interference by
politicians and influential businessmen.

The agency must restructure the assets and sell them to the
market to raise cash to help cover the state budget deficit.

IBRA is targeted to raise Rp 27 trillion in cash this year,
and Rp 35.3 trillion next year, while the privatization program
is targeted to raise some Rp 6.5 trillion.

Pande, however, doubted that the integration of the two
functions -- privatization of state-owned enterprises and the
sale of assets managed by IBRA -- would be more effective under
one organization.

"That's just an excuse people are using to justify the
integration. While I'm not saying that it's wrong, how can
putting sick assets together with more sick assets produce a
healthy outcome?" he said, explaining that all the state-owned
companies targeted for privatization and the assets to be sold by
IBRA had in common was that they were "sick" assets.

Pande was also concerned about the political nuances
surrounding the integration, saying that Laksamana was also an
executive of Megawati's Indonesian Democratic Party of Struggle.

"This could lead to a very unhealthy impression which should
at all costs be avoided," he added.

Bustanul Arifin, an economist from the Institute for
Development of Economics and Finance (Indef), said the deep
political implications of the integration of IBRA into
Laksamana's portfolio could become the bane of the current
government.

"I'm afraid that if this government interferes too much (with
the operations of IBRA) and deviates from the rules of
transparency, this administration will be digging its own grave,"
he said.

Bustanul explained that as a major source of finance, putting
the sale of IBRA assets and of state enterprises under a "party
man" would give rise to suspicions that the proceeds of asset
sales would go into the party's coffers.

Both Pande and Bustanul agreed that Laksamana would have to
convince a lot of people that he was not working for the benefit
of his party but rather for that of the country.

"IBRA has to be accountable, be open to the public and
information has to remain accessible to the public," Bustanul
said, explaining that greater transparency was needed especially
as the overhead costs of the agency was very high while the
public had yet to see any significant results from asset sales.

Separately, Golkar party legislator Paskah Suzetta questioned
the legitimacy of the integration, saying that it was against the
1998 law on banking.

Also voicing concern over the loss of IBRA's independence, he
explained that the law on banking stipulated that the government
could establish a special body on a temporary basis to
restructure unhealthy banks, including selling off assets
belonging to those banks.

Paskah, who sits on the House of Representative's Commission
IX on financial and development planning affairs, asserted that
incorporating this special body into the government structure
would directly violate the law.

He said that the House would invite the minister of finance to
a hearing next week to explain the presidential decree. (tnt)