House wants end to FSPC's role in economic restructuring

JAKARTA (JP): Legislators called on the government to terminate the role of the powerful Financial Sector Policy Committee (FSPC) in the country's major bank and corporate restructuring programs of the Indonesian Bank Restructuring Agency (IBRA).

The legislators said on Wednesday that the FSPC had not been effective and had instead obstructed the work of IBRA.

"The finance minister can propose the President dissolve FSPC," said Paskah Suzetta, a senior legislator of the Golkar Party, during a hearing between the House of Representatives Commission IX on state budget and finance, and Finance Minister Prijadi Praptosuhardjo.

"The FSPC has often made damaging intervention (to IBRA)," added Zoelvan Lindan, a legislator of the Indonesian Democratic Party of Struggle (PDI-Perjuangan).

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 programs designed 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.

Prijadi is expected to respond to the calls at a follow-up meeting next week.

The legislators' demand, however, may create a new political obstacle to the country's major economic reform program already strongly criticized by the International Monetary Fund due to the snail's pace of the reform implementation.

But Paskah said that the FSPC had failed to make credible decisions.

"It's only slowing the work of IBRA," he said.

He said that according to the existing law, there was no obligation for IBRA to seek the approval of the FSPC for its major bank and corporate restructuring program.

"IBRA should only report to the finance minister," Paskah said.

Zoelvan added that IBRA must only report to the finance minister to ensure that the agency was not being used as a "vehicle" by a certain group.

The question over the role of the FSPC gained momentum following the recent resignation of two IBRA deputy chairmen which was widely believed to have been prompted by the extensive intervention by the FSPC in IBRA.

IBRA deputy chairmen Jerry Ng and Mahmuddin Yasin recently announced their plans to resign. But the finance minister has insisted Mahmuddin stay.

House members also suspected that the resignation of the two top IBRA officials was due to the strong intervention by the FSPC.

"Why have they resigned? Is it because of the strong intervention (of FSPC)? They can't just submit their resignation without a clear reason," legislator Tjahjo Kumolo said.

The top IBRA officials openly denied suggestions that their resignation had anything to do with FSPC intervention.

IBRA controls some Rp 600 trillion worth of banking assets taken over from closed down, nationalized and recapitalized banks. The assets include bank non-performing loans (NPLs) and ownership in various companies surrendered by former bank owners to repay their debt.

The agency must sell the assets to raise cash to help finance the state budget, and must also restructure the NPLs.

Under the existing mechanism, IBRA must seek the approval of the FSPC on any major debt restructuring or asset sale programs worth over Rp 1 trillion.

But many of the decisions taken by the FSPC have received widespread criticism, including the seemingly special deals provided to indebted conglomerates.

The IMF, which is providing a multibillion dollar bailout loan to the country, has also criticized the delay in the sale of IBRA ownership in the publicly listed Bank Central Asia (BCA) and Bank Niaga late last year. (rei)