Mon, 07 Feb 2000

IBRA completes 1st round of internal restructuring

By Reiner S

JAKARTA (JP): The new chairman of the Indonesian Bank Restructuring Agency (IBRA), Cacuk Sudarijanto, quietly completed the first round of the agency's "internal restructuring" last week, but formidable challenges lie ahead.

When he took over the helm at IBRA early last month, Cacuk said a management reshuffle was his top priority, in order to bring in "fresh blood" to reinvigorate the agency, which had been hit by the Astra sale debacle and domestic political uncertainty.

"I have made internal restructuring a priority because a successful leader is one who succeeds in internal restructuring," he said at a media briefing held on Friday to introduce his new deputies.

Cacuk said he selected the new deputies himself, but added that the final decision was made by Minister of Finance Bambang Sudibyo.

He dismissed suggestions the new faces represented certain powerful businessmen who owed billions of dollars to IBRA, a unit of the finance ministry.

"(They) don't represent any conglomerates ... and I'm not representing any political party," he stressed.

Cacuk had been active in a small political party before entering IBRA, raising concerns that his new position would benefit a certain political grouping.

The internal restructuring at IBRA also creates two new deputy-level positions in charge of bank restructuring and risk management, which previously were working units.

IBRA's new structure is headed by Cacuk. Arwin Rasyid, the former head of the risk management unit, is now the agency's senior vice chairman.

The other new faces include Jerry NG, former vice president of Bank Universal, who is now deputy chairman of bank restructuring.

Mahmudin Yassin, a former official at the finance ministry, has been appointed deputy chairman of asset management investment, which is responsible for the sale of the agency's assets.

Risk management affairs at IBRA are now being handled by Chandra Purnama, the former head of state Bank BNI's card center division.

Sumantri Slamet and Eko S. Budianto retain their respective positions as deputy chairman for support and administration and deputy chairman for asset management credit, which is responsible for recovering more than Rp 230 trillion in nonperforming loans at banks under the agency's management.

Cacuk did not say whether he would launch a second round of internal restructuring at the agency, but said he was determined to take strong action against IBRA officials found guilty of misconduct or accepting bribes.

"I will not discriminate. I won't hesitate to take action against those who flirt (with IBRA's debtors)," he said in response to reports that a subordinate of Eko's had received a payoff from one of the agency's largest debtors.

"I can't stand corruption," he said, pointing to his dismissal as president of state telecommunications firm PT Telkom in 1992 for attempting to block unfair contracts between Telkom and well- connected businessmen.

But Cacuk said his main priority now was to speed up the sale of IBRA's various assets.

"Our mandate is to expedite the sale of assets to meet the government's target, but it won't be through fire sales," he said.

Cacuk's predecessor had been criticized for moving too slowly in selling the assets managed by the agency.

"The challenge now is how to (help) stabilize the rupiah at Rp 7,000 (to the US dollar)," he said, highlighting the current weakening of the rupiah to around 7,600 to the dollar.

IBRA is expected to raise some Rp 17 trillion in the current fiscal year ending on March 31 to help finance bank restructuring and recapitalization. The agency has also been set the target of raising around Rp 16 trillion in the April to December 2000 budget year.

The agency has so far raised more than Rp 12 trillion from the sale of assets under its control. There are questions as to if IBRA can meet the Rp 17 trillion target in less than two months, particularly after its failure to sell publicly listed auto giant PT Astra International to a consortium led by Newbridge Capital and Gilbert Global Equity Partners.

IBRA canceled its exclusivity agreement with the Newbridge/Gilbert consortium last week after the latter failed to provide a 30 percent down payment by the set deadline.

The consortium had earlier criticized Astra's Rini Soewandi- led management for obstructing a due diligence by not providing the necessary information. Rini denied the accusation.

But Cacuk is optimistic the Astra sale can be completed by March 25.

The bidding process is scheduled to reopen on Friday.

Cacuk is also optimistic that Astra will remain attractive to investors. He said that during a recent presentation in London, European businessmen hurried to call their offices after learning IBRA had canceled the planned sale to the Newbridge/Gilbert consortium.

IBRA has said it expects to raise at least Rp 2 trillion from the sale of its 45 percent stake in Astra. The agency also plans to sell around 30 percent of Bank Central Asia (BCA) in March through an initial public offering, which it expects to raise around Rp 3 trillion. Astra and BCA are among the agency's most valuable assets.

But domestic social and political problems are undermining IBRA's attempts to lure foreign investors.

The standoff between President Abdurrahman Wahid and Coordinating Minister for Political Affairs and Security Gen. Wiranto, who is also a former military commander, rumors of a military coup, separatist movements in resource-rich provinces and sectarian clashes are factors causing jitters to would-be investors.

But Cacuk seemed to downplay these fears. "President Wahid has said that he's in control of the situation .... So our plans will not be hampered by security and political problems."

He said many investors in London had expressed interest in investing in IBRA's plantation assets.

"England is the guru of the plantation industry. If investors from this country invest in our plantations, the performance of the local plantation industry will greatly improve," he said.

Analysts have said IBRA's success in raising cash will be key to ensuring the country's economic recovery.

"The success of bank and corporate restructuring will largely depend on the performance of IBRA," said Gadjahmada University economist Sri Adiningsih.

IBRA senior vice chairman Arwin Rasyid said that besides raising cash, the most challenging task facing IBRA was how to restructure the ailing real sector by encouraging foreign investors to enter into the various companies now under the agency's management.