House asks IBRA to increase 2001 asset sale target

JAKARTA (JP): The House of Representatives Commission IX on state budget and finance has asked the Indonesian Bank Restructuring Agency (IBRA) to consider increasing its 2001 cash sales target to around Rp 40 trillion (US$4.4 billion).

Head of the commission Benny Pasaribu said the agency could do that by selling the assets that have strong market value.

"I have asked them whether Rp 40 trillion is possible to achieve. And I have told them to check which assets have high market value," Benny told reporters following a closed-door meeting with newly appointed IBRA chairman, Edwin Gerungan.

He said that more proceeds from IBRA asset sales were important to support the state budget.

In the draft 2001 state budget, the government has targeted IBRA to raise around Rp 27 trillion in cash. The draft has yet to be approved by the House.

IBRA controls around Rp 600 trillion worth of assets received from closed down and recapitalized banks in 1998 and 1999.

The agency is mandated to sell the assets back to the private sector and raise money to help finance the state budget which is heavily burdened by the huge cost of the country's bank restructuring and recapitalization programs. IBRA has until 2004 to complete the job.

But Benny said that obtaining cash now was important because "the value of the money is higher now than it will be in 2004."

He said that the commission would set up a special meeting to discuss the issue.

IBRA has been criticized by the International Monetary Fund and the World Bank for its slowness in the disposal of assets. The appointment of Edwin, replacing Cacuk Sudarijanto, is related to efforts to speed up the sale of IBRA assets.

Benny said that the House wanted IBRA to have asset recovery rates of 70 percent compared to the current 25 percent level.

Benny said that the House also demanded the agency to improve transparency especially in the asset sales process and debt restructuring policy.

IBRA, a unit of the finance ministry, has been under strong pressure from the public not to sell the assets back to the former bank owners although there is no specific law forbidding them to repurchase the assets.

Coordinating Minister for the Economy Rizal Ramli said late on Friday that the former bank owners would not be allowed to repurchase the assets unless they have first fulfilled their obligations to the government.

The ex-bank owners, who are also the country's top business tycoons, owe hundreds of trillions of rupiah to the government after their banks received massive government liquidity support.

Rizal was deeply disappointed after revealing that the sale of shares in Singapore-listed QAF Pte. Ltd. by IBRA was purchased by a company linked to the Salim Group, one of the former bank owners with a huge debt to the government.

Rizal said that the purchase was unethical because Salim should have used the money first to settle its obligation to the government.

IBRA is targeted to raise Rp 18.9 trillion in cash this year, and so far the agency has raised about Rp 14 trillion. The agency plans to sell more assets this month particularly shares in the Salim Group companies like TV broadcasting company PT Indosiar, retailer PT Indomarco Prismatama, and a palm oil plantation firm.

The government is now facing a dilemma whether to sell Indomarco via an initial public offering (IPO) or through a strategic sale.

A strategic sale would result in a higher selling price, but in terms of transparency an IPO mechanism is better. Cigarette maker PT HM Sampoerna is reported to have offered a premium price for 51 percent of Indomarco.

The issue of transparency is particularly important now as there are suspicions that the Salim Group has been trying to repurchase its assets via a third party.

A source said that the Financial Sector Policy Committee (FSPC) has already made a decision on the mechanism for the sale of the Indomarco shares.

The source said that it would be announced on Monday.

IBRA initially planned to sell 20 percent of its 51 percent interest in Indomarco via an IPO later this month. (rei)