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)