Govt to exclude Salim Group from BCA sale

Berni K. Moestafa, The Jakarta Post, Jakarta

Addressing public suspicion that the Salim Group was vying to regain control over Bank Central Asia (BCA) through proxies, the government said Monday it would focus on bidders with strong credibility in choosing the buyer of a 51 percent stake in BCA.

A government source also revealed to The Jakarta Post that the government was quietly leaning toward U.K.-based Standard Chartered Bank Plc. over other bidders who are vying for control of BCA.

State Minister of State Enterprises Laksamana Sukardi said the criteria for determining the winning bid had been completed.

"The standard is quite high for the credibility and reputation of the candidate; a financial institution that is reputable, owns large capital and has a very good rating," he told reporters after a cabinet meeting.

"I, as a State Minister, am in charge of this, there are neither gaps (for Salim to enter), nor quiet deals."

He was referring to BCA's sales procedure by the Indonesian Bank Restructuring Agency (IBRA), which is managing the transaction. Laksamana's office oversees IBRA.

Once the largest private banks, BCA was taken over and bailed out by the government through IBRA after the bank suffered grave financial difficulties in the wake of the 1997 financial crisis. The bank had also breached the legal lending limit regulations by channeling most of its money to the Salim Group, the founding owner of the bank.

The government has barred Salim from regaining control in BCA this time around.

Salim also was required to surrender various assets to IBRA to repay debt to the government, which channeled massive liquidity support into BCA during the crisis period.

But suspicion remains high that Salim, one of the largest conglomerates in Indonesia, intends to regain control of BCA.

Whispers abound that the group had used proxies to buy back its assets, most notably, the television broadcasting company PT Indosiar Visual Mandiri, and auto manufacturer and distributor PT Indomobil Sukses Internasional.

To this day, the identity of Indosiar's purchaser PT TDM remains largely unknown by the local media and business community here.

Indomobil is now controlled by a group of investors under a consortium led by PT Trimegah Securities. Their identities are also somewhat of a mystery.

A report by AFX-ASIA, quoting Business Times on Monday, said the Salim Group had raised US$200 million in loans from foreign banks for the purpose of buying back Salim's assets from IBRA.

Last week, the Business Competition Supervisory Commission (KPPU) said it planned to investigate the possibly illegal sale of Indomobil and the connection, if any, to the planned sale of BCA.

The current list of BCA's eight bidders contain perhaps six with a suspicion of links to Salim.

Of the eight that made the shortlist, only Standard Chartered and U.S. investment firm Newbridge Capital, were deemed closest to what Laksamana defined as credible.

Standard Chartered however, has had its share of bad experiences in the acquisition of a local bank.

A politically-linked loan scandal at Bank Bali and opposition from its employees against Standard Chartered management forced the multinational bank to scrap the transaction.

Meanwhile, a government source said Standard Chartered may be looking for a partner in buying BCA to reduce its exposure locally and reduce the likelihood of a nationalistic backlash by workers.

The source added that the rating of the U.K. bank risked being downgraded if it pushed ahead for control of BCA.

BCA is also facing competition from other Southeast Asian banks in attracting Standard Chartered. The U.K. firm is scouting the region's retail banks for cheap acquisition opportunities.

While Standard Chartered may score high in credibility points due to its reputation, the more urgent question now is how far it is willing to go against the other bidders in terms of BCA's final sales price.

"We don't want to sell BCA to brokers with unclear ratings, little experience in the banking sector or those who are unable to raise capital for the bank in the future," Laksamana said.

The remaining bidders are undergoing a bidding process and a full examination by Bank Indonesia to gauge the credibility of the investors but also to filter out Salim's money.

"It doesn't take a genius to know the profile of a bidder," Laksamana said of the central bank's examination process.