House yet to give support to plan to revise MSAA

JAKARTA (JP): The House of Representatives would only support the government's plan to revise an earlier agreement with former bank owners after a thorough study has been completed, according to House Speaker Akbar Tandjung.

Akbar said on Wednesday that the government had agreed to form a joint investigation team with the House to study the controversial agreement called the Master of Settlement and Acquisition Agreement (MSAA).

"The government has said that it plans to revise the MSAA... But the House needs more time to study it first before we can come up with our final say," he told reporters in a joint press conference with Finance Minister Bambang Sudibyo.

"The proposed revision will be a valuable input for us," he added.

He said that the team would work over the next two to three weeks, but didn't give any deadline.

The government, represented by Bambang, met with the House in an apparent bid to seek support for its bid to force the powerful and influential former bank owners to completely repay their multi-billion dollar debt to the government.

The MSAA agreement was made during the previous administration of president B.J. Habibie. Under the agreement, former owners of four private banks were allowed to surrender assets to the Indonesian Bank Restructuring Agency (IBRA) to repay their debts. The banks included nationalized Bank Central Asia (BCA), the now defunct Bank Dagang Nasional Indonesia (BDNI), Bank Umum Nasional (BUN) UN and Bank Subentra.

The government, through the central bank, injected more than Rp 100 trillion in emergency liquidity support loans to the four banks during the peak of the country's financial crisis to bailout the banks amid massive bank runs in 1998 and 1999.

In addition to the MSAA, IBRA signed another less controversial agreement called the Master of Refinancing Agreement (MRA) with another group of former bank owners.

Coordinating Minister for Economy, Finance and Industry Kwik Kian Gie was the first to raise the controversy surrounding the MSAA. He said late last month that the present value of the assets was much lower than the total obligations of the former bank owners.

Kwik said that the MSAA must be revised because under the agreement it was the government which would cover any commercial loss if the realized value of the assets turn out to be lower than the debt.

Kwik pointed out as an example that the Salim Group, the former owner of BCA, had total debt of around Rp 52 trillion, but the more than 100 companies surrendered to IBRA are now only worth around Rp 20 trillion, leaving the government and tax payers to cover the difference.

Bambang said that there were three main reasons why the MSAA must be revised.

Firstly, the agreement was legally defective, benefiting the former bank owners at the expense of the government.

"It is an uneven agreement," Bambang said.

"Secondly, we have observed that the debtors have not complied even to this inequitable agreement," he said.

"And thirdly, there is evidence that the agreement was not based on good faith (of the former bank owners)," he added.

"These reasons are enough to justify revision of the MSAA," Bambang said.

He also said that according to his personal opinion, the former bank owners should be held responsible for any crimes they committed in relation to the channeling of the liquidity supports even if they have surrendered assets to repay their debts to the government.

He said that the original MSAA tended to compromise banking crimes of the past.

An audit made by the Supreme Audit Agency (BPK) revealed that out of the Rp 144.5 trillion of the emergency liquidity support injected to 48 commercial banks, some Rp 138.4 trillion had been misused. BPK said that instead of repaying depositors, the banks used the cheap loans for currency speculation or lending to affiliated business groups, raising the possibility that the banks had breached the legal lending limit. (rei)