Govt to decide on controversial debt plan by March: Minister

Govt to decide on controversial debt plan by March: Minister

Agencies, Jakarta

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said Tuesday that he hopes the government will make a decision next month on a controversial plan to give former bank owners more time to repay billions of dollars to the government.

"I'm hoping that maybe before the beginning of March we will have a decision," Dorodjatun told foreign correspondents at a luncheon.

The Bank Restructuring Agency (IBRA) proposed earlier this year to give former bank owners a further six years to repay US$13 billion the government handed them in emergency loans in the wake of the 1997 Asian financial crisis.

The debtors, many of them close associates of former President Suharto, agreed in 1998 to repay the loans within four years and pledged personal assets as security for the borrowings. IBRA's proposal extends that deadline to 10 years total.

Critics say the proposal bows to pressure from politically connected debtors, while forcing the government to wait even longer to get money back from its total $60 billion bailout of the financial system, one of the largest in history. While it waits, the state will have to rely on foreign donor loans to fill its huge budget deficit.

Last week, the International Monetary Fund urged Indonesia to make a decision on the former bank owners' debt, saying it "looks forward to the government developing a clear strategy on this matter."

So far, IBRA's asset sales have come largely from the Salim Group, once Indonesia's largest conglomerate, and former owner of PT Bank Central Asia. Other debtors have effectively blocked sales of their assets.

Indonesia must move ahead quickly with the sale of BCA to help investor confidence, Dorodjatun said, without elaborating. Last week, IBRA Chairman I Putu Gde Ary Suta said he hoped to sell the bank within two or three weeks. Front runners to win the bid for a 51 percent stake are Standard Chartered Bank PLC and the U.S. financial firm Farallon Capital.

Indonesia needs to show government creditors under the Paris Club that the government is making serious efforts to raise more cash from asset sales to bring down its deficit, analysts say.

Selling BCA is crucial to reaching an agreement with Paris Club creditors at a meeting in April to reschedule around $5 billion coming due from the middle of this year until the end of 2003.

Dorodjatun also said Indonesia has been showing some strong signs of healthy economic growth but faces three main risks ahead.

He said global economic slowdown, infrastructure problems, and the challenge of maintaining investment were the key potentially negative areas to watch.

On the plus side he said he was "amazed by the resilience of the domestic market".

Indonesia's "commodity-based provinces are booming", the country saw growth of 10 percent in both electricity and cement demand in 2001 and the data was positive in many industry-related areas, Dorodjatun said.

Indonesia saw gross domestic product growth of 3.32 percent in 2001, down from 4.8 percent the previous year but respectable by regional standards. Domestic demand was a key element in the growth.

The budget forecast for 2002 is four percent growth. Dorodjatun made no specific fresh prediction for 2002 but said it and the years thereafter would test whether the country could eventually get back to seven percent annual growth.

In the case of a hike in fuel prices aimed at cutting government subsidies, he said the government took its time in implementing the boosts, with the result that: "I think we have done that really much better than what we have seen in the past."

Similar hikes before had sparked serious protests and violence. By comparison the latest round of increases in January went relatively smoothly.

Regarding decentralisation of Indonesia's government -- a contentious process because of related conflicts between authorities in Jakarta and the regions and in turn with private companies not sure whose lead or regulations to follow -- Dorodjatun denied the Megawati administration wanted to reverse the process.

"There is no way for us to backtrack in terms of decentralisation," he said.

"We want to refine it" with certain guidelines but not go back to Jakarta's old authoritarian ways, he said.