House approves government's plans to sell three banks
House approves government's plans to sell three banks
Dadan Wijaksana, The Jakarta Post, Jakarta
The House of Representatives has approved "in principle"
government plans to sell majority stakes in the publicly-listed
Bank Niaga, Bank Danamon, and Lippo Bank this year.
"In principle, we've agreed with the plans to sell Bank Niaga,
Bank Danamon and Bank Lippo this year. But since there are still
some technicalities to be discussed, three teams would soon be
set up to accommodate those issues," Paskah Suzetta, deputy of
the House Commission IX on financial affairs, told reporters
following a hearing on the divestment plan on Wednesday.
Each team would be comprised of legislators and officials of
the Indonesian Bank Restructuring Agency (IBRA), and will be in
charge of determining details of the sale mechanism of each bank,
Paskah added.
The government, through IBRA, plans to sell off the banks this
year in compliance with what has been agreed to with the
International Monetary Fund (IMF), as stated in the latest letter
of intent (LoI).
Under the LoI, IBRA has to finalize the disposal of majority
stakes in Bank Niaga and Bank Danamon by mid-September and
December, respectively.
The completion of the Bank Niaga sale should then be followed
by the launching of Lippo Bank divestment program.
The government becomes the majority owner of the three banks
after it bailed out the banks in the wake of the late 1990s
banking crisis. IBRA is mandated to sell the government shares in
the banks as part of efforts to restructure the banking industry
and to raise cash to help finance the state budget deficit.
The government through IBRA currently owns a 97.15 percent
stake in Bank Niaga, 99.3 percent in Bank Danamon, and 57 percent
in Lippo Bank.
IBRA is now planning to sell a 71 percent stake in Bank Niaga,
after earlier attempt this month to sell a 51 percent stake to
strategic investors was canceled due to low bidding prices of Rp
20 and Rp 30 per share from the only two final bidders. As a
comparison, the market price of the bank shares at the time was
around Rp 70.
The agency has said that the first 20 percent of the shares
would be sold via a secondary offering mechanism in the stock
market. The price will be used as a benchmark for the sale of the
remaining 51 percent stake, possibly to a strategic investor.
IBRA is also planning to adopt a similar strategy for the sale
of Bank Danamon in a bid to obtain respectable proceeds.
The divestment of government shares in private banks is
expected to lure credible investors which could in turn improve
the banks' performance, thereby reviving the banking sector's
intermediary role.
It will also raise cash to help finance the 2002 state budget
deficit, projected at some Rp 42 trillion or 2.5 percent of the
country's gross domestic product.
The government sold a controlling stake in Bank Central Asia
(BCA) to a strategic investor in March.
The sale has proved to be helpful in cheering up investor
sentiment in the country, indicated by the recent surge in the
exchange rate of the rupiah against the U.S. dollar to a nine-
month high, and a strong rally on the local stock market.