Govt to decide on debt extension plan Thursday

The Jakarta Post, Jakarta

The government said on Tuesday it had finalized a draft decision on a controversial debt extension plan, and would make a final decision on whether to go ahead with the plan during a Cabinet meeting on Thursday.

Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti said a decision was due to come out as part of an economic stimulus package the government would release.

"We will submit it (the package) at Thursday's Cabinet meeting. God willing, on Thursday we will announce all decisions on what we're going to do," Dorodjatun told reporters after meeting with Vice President Hamzah Haz.

He gave no details on the draft decision, which he, the coordinating minister for security affairs and the minister of social affairs formulated as part of a joint team.

The government formed the joint team in response to the controversy that erupted last December over the debt extension plan.

A decision on the issue could put to rest the protracted public debate over a plan to grant large debtors up to 10 years to repay their loans. The debtors currently have four years to make good their loans.

The plan would apply to former owners of banks the government bailed out at the height of the financial crisis in the late 1990s.

A large percentage of this bailout money, disbursed as emergency loans totaling some US$14 billion, was misused.

Bankers agreed to repay the loans by surrendering assets of equal value to the funds they received within four years. In return, they would not face criminal charges.

However, most debtors have yet to begin repaying their loans although many of their debt settlement deals expire this year.

At the same time, the assets that were surrendered by the bankers have declined in value by as much as 80 percent.

Selling these assets would allow the government to recoup just 20 percent of the taxpayers money that was used to bail out the bankers.

The plan to grant these bankers more time to repay the loans was harshly criticized by the public, and was reportedly not well received by most ministers.

Several Cabinet meetings called to discuss the plan ended without a decision, which led President Megawati Soekarnoputri to assign Vice President Hamzah Haz to take over the discussions.

Many believe the decision reached under Hamzah will see the government strike a middle ground between easing terms on cooperative debtors while getting tough on uncooperative ones.

Dorodjatun said the draft decision also dealt with debt restructuring for small and medium enterprises and the uncollected debts of farmers.

The decisions to these issues form part of a policy guideline known as the Economic Stimulus Package. Few details of the package have leaked out.

Some economists who have been invited to discuss the plan with Hamzah, described it as a locally drafted letter of intent, referring to the economic reform targets outlined in the government's letter of intent with the International Monetary Fund.