Govt cancels Bank Niaga sale

Govt cancels Bank Niaga sale

Dadan Wijaksana
The Jakarta Post
Jakarta

The Financial Sector Policy Committee (FSPC) decided on Sunday
to cancel the sale of the government's 51 percent stake in
publicly listed Bank Niaga to strategic investors because of low
bidding prices.

FSPC secretary Lukita Dinarsyah Tuwo said the powerful
committee had now urged the Indonesian Bank Restructuring Agency
(IBRA) to look for other divestment methods that could generate
higher proceeds.

"As the strategic sales only produced low bidding prices, the
committee decided to scrap the process and would instead look for
other mechanisms to seek optimum recovery rates," Lukita told a
press briefing following the FSPC meeting.

FSPC groups several senior economics ministers and has the
final say on the country's asset sale program.

Lukita said the bids accepted by the bidders were only in the
range of Rp 20 (around 0.3 U.S. cent) to Rp 30 per share.

In comparison, the market price of the shares at the time the
final bids were made was around Rp 70.

Only two consortia made it to the final round led by
Australia's ANZ Banking Group and Malaysia's Commerce Asset
Holding respectively.

State Minister of State Enterprises Laksamana Sukardi had
earlier told the press that the government was likely to cancel
the strategic sale because of the low bids and would ask IBRA to
look for other selling strategies including via private placement
of a secondary offering in the stock market.

Lukita fell short of explaining those strategies but said IBRA
would be flexible in determining the options, as long as it could
produce better proceeds.

The government, through IBRA, owns a 97.15 percent stake in
the mid-sized Bank Niaga with the remaining amount held by the
public, which came as a result of the government taking over and
recapitalizing the bank in the late 1990s.

The government is supposed to complete the sale of Bank
Niaga's controlling shares this month as agreed with the
International Monetary Fund (IMF), which is providing a
multibillion dollar bailout program.

The divestment will generate cash to help finance the 2002
state budget deficit. IBRA is targeted to raise more than Rp 35
trillion in cash this year.

With this new development, meeting the June deadline looks
very unlikely.

The IMF has insisted the government should not delay the sale
program so the latter could concentrate on selling off more
banks.

By the end of the year, the fund demands Indonesia sell two
other banks beside Niaga, namely Bank Danamon and Bank Lippo.

Any delay in the asset sale program would not only hamper
IBRA's efforts to raise cash this year, but would also hurt
sentiment in the rupiah.

However, as a consequence of the sale cancellation, the
hardest task now will be convincing investors that the country is
still committed to its economic reform program.