Govt to punish bad bankers, debtors
JAKARTA (JP): Minister of Finance Bambang Subianto said on Friday the government would take legal action against bad bankers and debtors, responsible for at least Rp 150 trillion of bad debts in the country's ailing banking industry.
He said efforts to settle the massive amount of nonperforming loans (NPLs) would not only involve debt restructuring measures, but also include a probe into violations of bank prudential regulations.
"Many of the nonperforming loans are linked to bad lending practices. That's why efforts to resolve the bad debt problem won't be achieved only through restructuring measures," he said after a meeting of the Economic and Financial Resilience Council (DPKEK) chaired by President B.J. Habibie at the State Guest House.
Bambang said legal action as well as transparency in the debt restructuring measures were necessary to prevent moral liabilities.
In March, the government banned 172 bankers of the 38 closed banks from traveling out of the country, but is yet to take a similar measure against bad debtors.
The government has turned down public demands to disclose the names of the bankers, and has withstood pressure to announce the central bank's list of bad bankers.
The Indonesian Bank Restructuring Agency (IBRA) has taken on over Rp 100 trillion in bad debts from the country's seven state banks.
The agency has also taken over more than Rp 120 trillion in bad debts of 40 closed private banks, nine recapitalized banks and 11 banks which were taken over.
The government failed to meet the April 30 deadline -- promised in a recent letter of intent to the International Monetary Fund -- to reach a loan workout agreement with 20 of the largest state bank debtors.
The government said it would take bankruptcy or liquidation measures against debtors who failed to agree to the restructuring plans.
It is no longer a secret that the 20 largest debtors -- which according to IBRA owed more than half of the NPLs of state banks -- are companies controlled by politically well-connected businessmen, including the siblings of former president Soeharto and their associates.
But IBRA deputy chairman Eko S. Budiyanto claimed on Thursday the agency had already completed the loan workout alternatives for the 20 largest debtors.
He said 76 percent of their bad debts, or about Rp 40 trillion, would be restructured, while the remaining 24 percent had no prospects.
"It may take 150 years in order to restructure this (the 24 percent NPLs)," he said.
The letter of intent to the IMF stipulates President Habibie will make the final decision on the restructuring of the 20 largest debtors in his capacity as chairman of the DPKEK.
The government appears to be playing down the delay of debt restructuring measures.
Jakarta Initiative task force chairman Yusuf Anwar, said on Thursday the delay would not cause problems for the IMF, which is organizing a multi-billion dollar bailout for Indonesia.
"I think the IMF will be reasonable enough," he said.
Economists, however, said the delay might be perceived by the international business community as reluctance on the part of the government to implement key economic reforms, prompting international donors to withhold aid disbursement for the crisis- hit economy.
The IMF has a commitment to provide Indonesia with $12.3 billion in bailout funds, of which some $9.5 billion has been disbursed.
IMF Asia Pacific director Hubert Neiss is scheduled to arrive in Jakarta early next week to review the reform programs and provide recommendations for the disbursement of another $460 million tranche.
Resolving the issue of mounting bad debts is a key factor for the country's economic recovery.
"Restructuring of corporate debts is a must for the recovery of the economy," Bambang said.
Under the government-designed debt restructuring plan, only debtors with prospective business potential will be encouraged or forced to agree to loan restructuring plans, while banks without prospects will be liquidated or seized by the government.
Analysts, however, said liquidation measures might not result in an optimal recovery of loans, as many of the debtors' collateral lacked value.
"The trickiest part is how to get these debtors to surrender their valuable assets, which are mostly overseas-registered assets," said one government insider.
IBRA's Eko acknowledged the agency had difficulties tracking down collateral of some of the debtors, as many of them received loans through a project-financing mechanism launched by their holding companies which was covered only by paper assets. (rei/prb)