Govt to provide tax incentives for debt restructuring

JAKARTA (JP): The government will provide approximately Rp 600 billion (US$70.59 million) in tax incentives to companies who go to the Jakarta Initiative Task Force (JITF) for help in restructuring their debts, according to a senior government official.

Junior Minister of National Economic Restructuring Cacuk Sudarijanto said on Tuesday the tax incentives, which would be offered until the middle of 2001, were part of the "carrots" being offered by the JITF to push for more debt restructuring deals.

Speaking at a joint media conference with Coordinating Minister for the Economy Rizal Ramli, Cacuk said an estimated $25 billion in corporate foreign debts would mature in the short term.

He said restructuring the debts was crucial to easing pressure on the rupiah and the country's balance of payments. "As some of the debts will mature in the short term, it will put pressure on the rupiah."

He hoped the corporate debts could be extended to between 10 and 12 years to lessen demands for the dollar, which in turn would allow the rupiah to stabilize.

Cacuk said the tax facility was made possible by the new tax law approved by the House of Representatives in July. Under the previous tax law, some forms of debt restructuring, such as cutting the amount of a debt, were taxable because the indebted companies theoretically earned "income" in the process.

JITF is under the coordination of Cacuk. The task force was formed in 1998 to mediate between debtors and creditors in order to help accelerate the restructuring of the country's more than $65 billion in corporate overseas loans.

The task force has helped restructure some $5 billion in corporate foreign loans, with a mandate to restructure another $3 billion to $5 billion by the end of this year.

The strategic objective is to restructure a total of $12 billion by April 2001.

Rizal said the government planned to meet with representatives of indebted companies next month to push for more debt restructuring deals.

He also said that once companies had reached restructuring deals, it was believed they would be able to resume accepting new loans from creditors.

Efforts by the JITF to push for more debt restructuring deals, however, have been inhibited by negative development on the country's political front. Analysts have said if the domestic political situation deteriorates, it will discourage debtors from restructuring their debts.

In addition to the various "carrots", the JITF is also introducing "sticks", including handing over uncooperative debtors to the Attorney General's Office to be brought to bankruptcy court.(rei)