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.