Govt backs policy on BRI corporate loan transfer

JAKARTA (JP): The government defended on Tuesday its controversial policy requiring state Bank Rakyat Indonesia (BRI) to divest its corporate loans by the end of this year despite the bank saying it was unlikely to meet the target.

Coordinating Minister for the Economy Rizal Ramli said BRI should divest all of its corporate credits to other banks as stipulated in the letter of intent (LoI) agreed with the International Monetary Fund early this month.

"BRI will have all of its corporate loans transferred out so that its corporate loans figures will stand at zero percent by the end of this year," Munir said on the sidelines of a seminar on economic recovery.

The transfer of the corporate loans was essential to allow the bank to focus on its main mission of providing credit to medium- and small-scale companies, Rizal said.

The chief economic minister said his office had held discussions with BRI directors to plan the best strategies in handling problems relating to the loan transfer, especially the mechanisms to divest the loans.

Rizal, however, fell short of specifying the transfer mechanisms agreed at between the government and BRI management.

Contradicting an earlier statement made by BRI, Rizal said the government was quite optimistic BRI would be able to transfer all of the bank's corporate loans in accordance with the LoI.

BRI president Rudjito said on Monday he was very pessimistic about the bank's ability to pass out all of its corporate loans this year as set out in the LoI.

He said it would be very difficult if not impossible for BRI to cut its corporate loans program to zero by the end of the year from the 20 percent -- worth about Rp 6.2 trillion (US$775 million) -- at present.

Minister of Finance Prijadi Praptosuhardjo was also skeptical of BRI's capability to meet the corporate loans transfer target.

He warned that BRI could break down if it was forced to divest its corporate loans all together this year, but did not explain why his office had not objected to the plan in the first place.

Under the newly revised LoI signed early this month, BRI is required to divest its corporate loans to other banks by the end of 2000 in order to ensure the bank's total commitment to small- and medium-scale enterprises.

In the earlier version of the LoI, which was signed in July, BRI was required to gradually reduce its corporate loans to 20 percent this year and 18 percent by the end of next year.

Economist Anggito Abimanyu agreed with Prijadi, saying that the government's target for BRI's corporate loans transfer was likely to be impossible.

"BRI stated in its business plan that it would cut out its corporate loans gradually by 2002, so I think it'll be very, very difficult for it to pass the loans out all at once this year," he said.

He said the sudden release of corporate loans would affect BRI's performance because the bank had been benefiting from the loans, which produce higher yields compared to those for small and medium enterprises.

Economist Sri Adiningsih said that BRI's surprising statement on its inability to meet the LoI target reflected the government's lack of coordination with related entities in the composing of the target programs set out in the LoI.

"I was astonished to hear BRI saying it was unlikely meet the LoI targets. It seems to me that BRI management was not involved in the preparatory discussions on the LoI in the first place," she said.

She said there was a possibility that other government work programs set out in the LoI were also agreed to without prior consultation with the respective parties.

Sri warned that the government's improper ways in setting the working targets could draw heavy criticism from the IMF.

"I think this will affect the IMF's review on us at the end of the year. It will be a big problem," she said. (cst)