Govt mulls 60 percent cut for IBRA debtors
Govt mulls 60 percent cut for IBRA debtors
The Jakarta Post, Jakarta
Nearly two months in the making, the alternative to the
controversial debt extension plan is set to be presented before a
Cabinet meeting today, in a scheme that may include offering
debtors a flat 60 percent debt reduction.
Chances have grown slim for the government to go ahead with
the much-criticized debt extension plan, which reportedly gained
little support from ministers.
Replacing the infamous plan, sources said, was a scheme Vice
President Hamzah Haz and his team had hatched in late January.
"From what I understood, Hamzah came up with two options,"
said one source who last week attended a meeting with the Vice
President to discuss the scheme.
One option he said was to offer debtors a 60 percent debt
reduction if they could afford a one-time cash settlement.
If workable, this scheme would bring in a recovery rate of 40
percent on the $10 billion or so that debtors still owe the
government under the shareholders settlement program.
For many, the program will expire this year. But controversy
arose from a plan to extend the program to up to 10 years from
four currently.
The program applies to former owners of banks which were
bailed out by the government during the peak of the late 90s
financial crisis. Most bankers were found to have misused the
funds.
Efforts to recoup them under the shareholder settlement
program have gone sour as nearly all debtors defaulted on
payments.
As the deadline nears, a settlement seems unlikely without
revising its existing payment scheme.
The initial plan to simply extend the payment period has faced
a bevy of critics and wedged a rift within the Cabinet.
Critics said there was no guarantee that debtors would start
paying once their payment period was extended.
What was most unjust was that while escaping payment, the
bankers were released of any criminal charges against them for
the abuse of the funds.
In response to public pressure, the government relented and
formed a team led by the three coordinating ministers for the
economy, security affairs and social affairs to seek options
other than the debt extension plan.
But the joint team reportedly did not meet until early this
month, pending the return of Coordinating Minister Yusuf Kalla
from his haj pilgrimage.
In the meantime, President Megawati Soekarnoputri has also
assigned Hamzah to oversee the issue.
Hamzah said he and his economic team were working with the
joint team, but it was unclear which side would have the final
say on the draft decision to be presented today.
Kompas reported Wednesday that the team had agreed to scrap
the debt extension plan, but the report did not say what new
payment would replace it.
A source at the Vice President's office said the second option
by Hamzah was to simply seize the assets owned by the debtors.
These were assets already under the Indonesian Bank
Restructuring Agency (IBRA), which is in charge of enforcing the
failing settlement program.
Under the program, the debtors could settle their debts by
handing over IBRA assets at equal value.
But as it turned out, their assets have declined in value by
as much as 80 percent. Seizing them now would yield a return rate
of only 20 percent if sold.
The inability to raise the recovery rate has also drawn the
attention of the International Monetary Fund (IMF), which called
for a better approach on the debtors by this month.
Thursday's Cabinet meeting will also mark Hamzah's return as
an economic policy-maker, and will include what he called an
economic stimulus package.
Economists, who were invited to his office last week, called
the plan a set of economic policy guidelines that would fine tune
the direction of the country's reform.