Govt mulls plan to help industries under IBRA
Govt mulls plan to help industries under IBRA
Berni K. Moestafa, The Jakarta Post, Jakarta
The government is mulling over accelerating the recovery of a
number of industries under the control of the Indonesian Bank
Restructuring Agency (IBRA), as part of a stimulus package for
the private sector to help drive economic growth.
Among the industries the government may be aiming at is the
electronics, textile, pulp and paper, and the shoe and leather
industries, according to a senior government official on Tuesday.
Secretary to the Financial Sector Policy Committee (FSPC)
Syafruddin A. Temenggung said the government planned to speed up
the restructuring of debts in these industries.
These are the debts of companies that IBRA took over as bad
loans from banks during the financial crisis in the late 1990s.
"The direction of revitalizing strategic sectors is that we
will prioritize those that are under IBRA. There will be a faster
restructuring (of debts)," Syafruddin told reporters after an
FSPC meeting. He said the FSPC had yet to approve the plan.
The FSPC groups together senior economic ministers, and is in
charge for the restructuring of IBRA debts worth over Rp 1
trillion (about US$98.13 million).
Most of the country's vital industries remain paralyzed given
the huge size of the debts they still owe under IBRA.
Slow debt restructuring talks have been a major drag on the
recovery of industries from the blow they took during the
financial crisis.
Workable restructuring deals reduce the debt burden on
companies, and allow them seek new loans for investment.
The bottom line is that private investment boosts economic
growth.
Shifting the economic growth engine to the private sector is
necessary in the absence of a strong state budget to fuel growth.
The government had said earlier it was devising a stimulus
package for the private sector to boost investment.
The need for investment on the part of export-oriented
companies is likely to pick up as world markets gear up for a
U.S.-led recovery.
Syafruddin said that expediting IBRA's debt restructuring
deals was part of the overall stimulus package currently planned.
But as yet, there was no clear explanation as to how the
government would create the stimulus given the constraints on the
state budget.
Syafruddin further said that IBRA planned to sell
unrestructured loans through securitization to raise more cash
from the loans.
"We will collect the IBRA loans, particularly the sustainable
debts and these are the ones we will securitize and auction off,"
he said without elaborating.
Details of the plan remain sketchy, but an FSPC official said
the securitization of IBRA loans allowed the agency to issue
bonds through a third party, which would later be determined.
"Securitization means IBRA can issue commercial papers like
bonds using its loans and their collateral," he explained.
The official, who refused to allow his name to be quoted, said
the bonds would carry coupon rates based on the interest rate
installments of the IBRA loans.
Also, bondholders would receive the backing of the collateral
that came attached to the loans, he explained.
In case of default, he added, the investor could seize the
collateral.
At present, IBRA disposes off its assets through the sale of
both restructured and unrestructured loans. That however has
earned it low recovery rates, as most investors purchase the
loans at heavily discounted prices.
The official said that through the securitization of IBRA
loans, the agency would be able to auction the loans without
offering discounts.
He did not mention the value of the loans that IBRA would
securitize. And it was unclear whether the scheme would guarantee
that the loans would be auctioned off at a better price than when
they were sold directly.
The International Monetary Fund (IMF) has stated its support
for the securitization of the loans and the forming of joint
ventures in speeding up the restructuring of debts under IBRA.