Govt avoids legal action against ex-bankers

The Jakarta Post, Jakarta

The government has vowed to take legal action against indebted former bankers if, by the end of March, they decline to sign an agreement to start repaying their debts.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti, however, warned that the legal action could cause the state to suffer more financial losses.

"One thing that should be remembered is that the 1998 agreement was an out-of-court settlement, so once we go to trial we can only use civil law," he told reporters on the sidelines of a seminar. He did not elaborate.

Under the civil law system, the government cannot put delinquent debtors behind bars. It can only confiscate their existing assets and sell them at going market rates.

Dorodjatun was commenting on the current controversy surrounding government plans to ease the repayment terms of debts owed by ex-bankers to the Indonesian Bank Restructuring Agency (IBRA).

Under the plan, the repayment period would be extended to 10 years from 4 years, and interest rates would be lowered to nine percent.

Dorodjatun said that the new plan must be signed by the debtors by the end of March or the government would be forced to take legal action.

The plan has sparked protests from various quarters, some of whom say that IBRA should take legal action against bad debtors instead of easing the repayment terms.

The reluctant debtors in question are those former bankers whose banks were bailed out by the government at the height of the 1997-1998 crisis.

In return, the government and the debtors signed an agreement under the shareholders debt settlement program in 1998, under which the debtors agreed to repay debts with cash and asset sales within four years.

More than three years after the scheme was put into effect, most have not even begun paying.