Tue, 04 Sep 2001

House delays decision on BCA divestment

JAKARTA (JP): The House of Representatives (DPR) delayed on Monday the decision as to whether or not it would endorse a new government plan to divest 51 percent shares in the publicly listed Bank Central Asia (BCA), saying it needed more time to study the proposal.

"Tomorrow (Tuesday) we will convene again to decide whether or not to endorse the government plan to sell 51 percent of its shares in BCA," head of House Commission IX on finance and state budget Benny Pasaribu said during a consultation meeting with Minister of Finance Boediono, State Minister for State-owned Enterprises Laksamana Sukardi and Bank Indonesia Governor Sjahril Sabirin.

The government had initially hoped that the meeting, called upon Boediono's request, would lead to the approval of the divestment plan, which is part of the government's latest agreement with the International Monetary Fund (IMF).

However, some lawmakers, notably those from the United Development faction, the Reform faction and the Crescent Star faction, argued against "making a hasty decision", saying they needed time to consult their leaders and study the planned divestment.

DPR members have become increasingly critical of plans to sell BCA shares after the government "unilaterally" agreed with the IMF to sell a 51 percent stake in BCA, the country's largest retail bank, in exchange for financial assistance from the IMF.

Legislators blocked the BCA sale program last year, prompting the IMF to suspend its US$5 billion loan program in the country.

The government earlier this year obtained approval from the legislators to only sell a 30 percent stake to a strategic investor, but following a recent negotiation with the IMF, the government announced the new sale plan.

Legislators against the divestment plan suspected foul play in the move, pointing out that the IMF had earlier agreed to sell only 30 percent of government shares in BCA.

Laksamana denied any foul play in the planned sale, saying the move was merely taken "out of responsibility to bring the country out of its current economic crisis."

"The planned divestment would hasten economic recovery," Laksamana said, adding that the decision was taken as a result of discussions among economic ministers and not due to IMF pressure.

He also said that strategic partners would agree to purchase BCA shares if they could have a controlling stake in the bank.

"Foreign strategic partners are willing to pay a premium of between 25 percent and 35 percent above the market price," Laksamana said without mentioning any potential bidders.

Laksamana said the entry of foreign investors into BCA would help restore confidence in the banking system and therefore minimize the risk of bank closure in the future which would place an additional burden on the guarantee fund.

"Moreover, the divestment plan stimulates foreign interest in the privatization of other government assets," he said.

The government has pledged to the IMF to collect some Rp 27 trillion (US$3.07 billion) in cash from selling assets held by the Indonesian Bank Restructuring Agency (IBRA) and Rp 6.5 trillion from privatization of state-owned enterprises.

Some lawmakers had also earlier expressed strong objections to the new BCA sale plan, arguing that selling BCA shares at the current price would bring no profit to the state's coffers.

While the consultation at the House was taking place, marked by interruptions and debates on whether the meeting was a consultation meeting or a working meeting, some students protested outside the meeting room, slamming Minister Laksamana for what they called a BCA sellout.

They carried pamphlets calling on the government to delay the plan to sell BCA shares to strategic partners. "Stop the divestment of BCA shares, go to hell IMF," some of the pamphlets said. (tnt/03)