Govt to exclude Salim Group from BCA sale

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.