House welcomes SCB's withdrawal from Bank Bali

JAKARTA (JP): The House of Representatives Commission IX covering finance and budget welcomed on Thursday Standard Chartered Bank's withdrawal from its plan to invest in Bank Bali, saying it would open up opportunities for other investors to enter the bank.

Chairman of the commission Sukowalujo Mintorahardjo told reporters the British bank's decision would allow other investors to buy IBRA shares in the bank in open bidding after the rights issue.

"Moreover, our investigations have also concluded that Standard Chartered's management and investment contracts with the Indonesian Bank Restructuring Agency (IBRA) for Bank Bali appeared to be legally defect," Sukowalujo added.

Standard Chartered confirmed in London late on Wednesday it was withdrawing from its management and investment agreements on the recapitalization of Bank Bali to remove any impediments that could deter investors from participating in the rights issue.

"Standard Chartered remains committed to the speedy recapitalization of Bank Bali. However, faced by continuing misinformation, it believes that this is best achieved by its withdrawal from the two agreements," it said in a statement.

Standard Chartered agreed in April to pay $56 million for a 20 percent Bank Bali stake to allow qualification for the bank recapitalization scheme.

But its audit uncovered Bank Bali had paid Rp 546 billion in commissions in early June to a firm run by officials of the powerful Golkar party for the recovery of Rp 904 billion in interbank loans from IBRA.

The revelations in late July sparked a political scandal that continues to make headlines.

Standard Chartered asked IBRA on July 22 to use its power to take over the bank. The agency did this on July 23 and gave Standard Chartered management control on July 26.

Separately, State Minister of Investment and State Enterprises Laksamana Sukardi said Standard Chartered decision would be a blow to future foreign investment in Indonesia.

Laksamana told reporters on Thursday the bank's difficulties in closing the deal to purchase a stake in Bank Bali highlighted Indonesia's weak legal environment.

"The most important issue for investors calculating their risks and rewards is legal certainty," Laksamana said.

Jusuf Anwar, chairman of the Indonesian Capital Market Supervisory Agency (Bapepam), commented that Standard Chartered's withdrawal would allow his office to speedily approve the bank's rights issue.

Anwar said he expected the rights issue to be completed by Dec. 31.

"Now Bapepam can have full disclosure of Bank Bali's documents, since it will no longer require copies of the management and investment agreements with Standard Chartered," Anwar said.

Not all analysts saw the bank's withdrawal as a serious blow to foreign investor interests in Indonesia.

Some argued Bank Bali was a one-off situation that wouldn't alarm those following Indonesian developments closely, a view which seemed reflected by the calm reaction of financial markets.

Jasso Winarto from Sigma Research saw Standard Chartered's exit as a positive step allowing Bank Bali's rights issue to proceed transparently.

He also did not believe Standard Chartered's move would discourage foreign investors, saying Indonesia was too large for them to ignore.

"Maybe Bank Bali's rights issue will not sell easily. But it will not affect foreign investment in general. I believe foreign investors are still vying for Indonesian assets," he said.

Sigma Batara Securities' head of research Widyaka Nusapati said Standard Chartered's pullout from the agreement did not necessarily mean it had backed down.

"I see this as a move by Standard Chartered to take over Bank Bali in a transparent manner, through the transparent process of a rights issue," he said. "So, the show-down between Standard Chartered and the Ramly family is still there."

In Wednesday's statement, Asia specialist Standard Chartered Bank said the staff of Bank Bali had been put in an untenable position, being forced to choose between the bank's founders the Ramli family and its own management team running the bank on behalf of IBRA.

Former controlling owner and president of Bank Bali Rudy Ramli said it would be better if he refrained from making any comments until he had read a copy of Standard Chartered's withdrawal letter.

"I am still apprehensive. I have been lied to too many times. The news about the withdrawal could be another ploy by Standard Chartered to quietly take over Bank Bali," added Rudy.

Bank Bali said last week it expected to raise Rp 4.037 trillion ($570 million) from a 99-for-1 rights issue with an offer price of Rp 60.68 per share.

The bank will issue 66.53 billion shares at a nominal value of Rp 5 per share. The shares will be listed in early January. (vin/rid)