Ibra closure to leave huge burdens

Dadan Wijaksana, The Jakarta Post, Jakarta

With the government preparing to close down the Indonesian Bank Restructuring Agency (IBRA) two weeks from now, the country stands to lose about 72 percent of the Rp 660 trillion (about US$7.76 billion) in state funds injected into ailing banks during the late 1990s financial crisis, leaving the people to bear the burden.

Set up in 1998, IBRA has managed to recover only about Rp 172.4 trillion of the state funds (representing a recovery rate of around 28 percent), through the sale of assets it took over from ailing banks and their former owners. One of the agency's three main tasks was to maximize the recovery rate and minimize the loss of state funds.

IBRA chairman Syafruddin Temenggung put down the loss of the state funds simply as part of "the cost of the crisis".

"If compared to the fiscal target (annual proceed target for the state budget), IBRA never fell short of those targets. In fact, IBRA's compliance stands at about 116 percent," Syafruddin said recently.

Though the agency boasts that an overall recovery rate of 28 percent is respectable, taxpayers will still have shoulder the lost funds. The state budget will have to cover the losses, meaning budget allocations for crucial development programs will be limited.

In 2004, for example, the budget has allocated Rp 62.4 trillion to service massive domestic debts resulting from the cost of the government bank bailout program. That amount represents more than 20 percent of the full-year tax revenue.

Some experts have criticized IBRA for failing to restructure a huge part of the non-performing loan (NPL) assets it took over from troubled banks.

Dradjad Wibowo, an economist at the Institute for the Development of Economics and Finance, said moves by IBRA to sell unrestructured NPLs at huge discounts to local banks in a bid to meet state budget targets partly contributed to the low recovery rate.

He added that banks purchasing the unrestructured bad loans could be put back in danger because the bad loans would inflate their NPL levels if not restructured.

IBRA was supposed to restructure the assets before selling them to investors.

Despite the low recovery rate of the assets under IBRA, the agency has moved toward dropping the threat of criminal charges against several former bank owners. Many of these former bank owners were among the biggest recipients of the state bailout funds.

Siti Hardijanti "Tutut" Rukmana, former president Soeharto's eldest daughter and the former owner of Bank Yakin Makmur, is the latest to receive release and discharge status. She has been deemed by the Financial Sector Policy Committee (FSPC) -- a powerful grouping of economics ministers overseeing IBRA -- as having been cooperative in settling her debt to the government.

Tutut adds to the already long list of debtors having been declared as cooperative by the FSPC. This list includes Hashim S. Djojohadikusumo, Njoo Kok Kiong, Honggo Wendratmo, Suparno Adijanto, Andy Hartawan, Ganda Eka Handria, Philip S. Widjaja and Mulyanto Tanaga, with a combined debt of more than Rp 600 billion.

Also included in the group: Sudwikatmono (former owner of Bank Surya and Subentra), Then Nin King (Bank Dana Utama), Hendra Liem (Bank Bumi Internasional), Ibrahim Risjad (Bank Risjad Salim), Salim (BCA) and Sjamsul Nursalim (BDNI).

All are among the 39 bank owners who received Rp 144.5 trillion in state funds during the crisis. Many of them were later accused of having misused much of the bailout funds by channeling the money into affiliated businesses -- a crime under the banking law.