Govt cancels Bank Niaga's stake 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.