House urges FSPC to stop meddling in IBRA's work

House urges FSPC to stop meddling in IBRA's work

JAKARTA (JP): The House of Representatives' Commission IX on
banking and the state budget said on Tuesday that the powerful
Financial Sector Policy Committee (FSPC) must cease its direct
intervention into the corporate and bank restructuring processes
undertaken by the Indonesian Bank Restructuring Agency (IBRA).

The commission said that the FSPC must focus on its role of
issuing policy guidelines for the restructuring program in line
with the presidential decree establishing the committee, rather
than making executive decisions.

It added that the FSPC's supervisory role should be
surrendered to IBRA's oversight committee.

The recommendation was contained in the commission's five-
point conclusion made at the end of a hearing with the finance
ministry, IBRA and Bank Indonesia. The finance ministry agreed to
accept the conclusion.

The FSPC groups several senior economic ministers led by
Coordinating Minister for the Economy Rizal Ramli. The committee
has the final say on major bank and corporate restructuring deals
worked out by IBRA.

The FSPC was formed early last year following the high profile
Bank Bali scandal, which allegedly involved a senior official of
IBRA. The committee was supposed to ensure good governance at the
agency.

But Director General of Financial Institutions at the finance
ministry Darmin Nasution admitted that over time the FSPC had
deviated from its main function as stipulated in the presidential
decree.

"Frankly speaking, the FSPC has not only set policy guidelines
but it has also been active in policy execution, approving or
disapproving restructuring programs on a case by case basis,"
Darmin told legislators.

"The FSPC must focus on policy guidelines, while the
supervisory function must be exercised by full-time
professionals," he added, referring to the agency's oversight
committee, which is chaired by former finance minister Mar'ie
Muhammad, a figure known for his strong integrity.

The House also said in its conclusion that the oversight
committee must review past decisions made by the FSPC. It is not
clear, however, whether this would be feasible or whether the
committee would be allowed to annul decisions that it made in the
past.

The FSPC has been accused of intervening excessively into
IBRA's affairs, thus causing holdups for the agency in completing
its bank and corporate restructuring program, something which is
crucial for economic recovery.

Earlier this year, two top IBRA officials tendered their
resignations amid rumors that they could no longer perform their
duties properly due to excessive interference by the FSPC,
including in respect of the restructuring of debts owed by
influential conglomerates.

IBRA, a unit under the finance ministry, controls a huge pool
of assets, worth more than Rp 650 trillion, that were transferred
from the ailing banking sector and former recalcitrant bank
owners. The massive extent of the assets managed by the agency
makes IBRA vulnerable to intervention from politicians and
influential businessmen. The agency is mandated to restructure
the assets it manages and sell them to raise cash.

One of the biggest and most controversial decisions taken
recently by the FSPC concerned the restructuring of the huge debt
owed by petrochemical giant PT Chandra Asri to a consortium of
creditors led by Japan's Marubeni Corporation.

Despite the fact that the committee reached a deal with
Marubeni, so far IBRA has continued to reject it on the grounds
that the Japanese creditor must convert more of its loans into
equity in Chandra Asri.

Emotional

Meanwhile, IBRA Chairman Edwin Gerungan was grilled by some
legislators during Tuesday's hearing over the recent sale of 25
palm oil plantations to Malaysia's Kumpulan Guthrie Bhd., for a
price of US$368 million.

The transaction was sealed in March. At a hearing in February,
some legislators had urged the government to cancel the planned
sale. The government, however, persevered with the plan but
promised to request that Guthrie maintain the commitment made by
the plantations' former owner to help local communities.

IBRA, however, did not formally notify the House that the deal
had been closed, causing anger among some legislators.

Edwin formally admitted the mistake during Tuesday's hearing,
and attempted to apologize.

"It's not enough for you just to apologize. If you're a
gentleman you must resign," said United Development Party (PPP)
legislator Uray Faisal Hamid.

"I'd be only too happy if I'm dismissed over this case,"
replied Edwin emotionally.

But Uray retorted: "You shouldn't wait to be dismissed ... You
should tender your resignation."

Edwin said: "OK, I'll do that." Other legislators then
attempted to calm the situation and urged Edwin not to resign.
Edwin declined to comment following the hearing. (rei)