Govt to recover 20% of state claims

Govt to recover 20% of state claims

Urip Hudiono, The Jakarta Post, Jakarta

Despite criticism, the Ministry of Finance remains upbeat about
meeting its target of recovering close to one fifth of debts owed
to the state this year.

Speaking during a hearing on Thursday with the House of
Representative's finance commission, the finance ministry's
Director General for State Claims and Distress Auctions, Machfud
Sidik, said that the government expects to recover up to 19.3
percent of this year's claims.

"This rate has been calculated based on the total value of
claims we expect to be able to settle this year, as compared to
the total value of claims we should be receiving," he said.

This rate appears fairly respectable, and is a little lower
than the 28 percent recovery rate booked by the now-defunct
Indonesian Bank Restructuring Agency (IBRA) after about six years
of selling distressed state assets.

As of April this year, Machfud further said, the recovery rate
amounted to some 47 percent.

Last year, the ministry recorded a poor recovery rate, only
managing to get back 14 percent of that year's total debts. The
ministry had 27,450 state claims worth Rp 5.7 trillion (some
US$593 million) in 2004, and only managed to settle 7,933 claims
worth Rp 806 billion.

Total outstanding state claims as of 2004 stood at Rp 21.1
trillion, Machfud said, with some Rp 11.6 trillion accumulated
over the last five years alone.

According to the relevant legislation, the finance ministry is
the ultimate assignee of debts owed to state institutions --
particularly state-owned banks. All such debts of more than Rp 50
billion are handed over to the ministry for further action with a
view to ensuring recovery.

Analysts have criticized this arrangement as giving
unscrupulous debtors the change to get their debts written off by
simply waiting for the settlement period to expire.

The ministry recently aroused public controversy following
media reports that it might consider writing off a portion of the Rp
11 trillion worth of bad debts owed by 34 debtors to the
country's largest lender, Bank Mandiri, as of April.

Machfud, however, explained that a debt write-off was not so
simple under the legislation.

"For a debtor with collateral, it must first pay up half of
the debt before being considered eligible for a write-off," he
said.

"Meanwhile, for debtors without collateral, they must at least
hand over 15 percent of their total debts."

Machfud further said during the hearing that the ministry held
about 15,000 distress auctions last year, generating Rp 1.8
trillion in proceeds.

The legislation says that the proceeds from a distress auction
go to the lender rather than to the treasury, although the
government does receive revenues from taxes generated by such
auctions, which last year totaled Rp 107.7 billion.