IBRA debtors seen to be regaining control of assets
The Jakarta Post, Jakarta
Selling assets in large chunks has helped the Indonesian Bank Restructuring Agency (IBRA) accelerate its asset-sale program, but analysts now question whether the agency may have been allowing these assets to fall into the wrong hands.
Last May, IBRA launched its first massive round of asset sales involving the divestment of Rp 135.45 trillion (about US$14.8 billion) worth of assets in one go.
Similar programs worth trillions of rupiah are still in progress, boosting IBRA's sales to Rp 41 trillion as of this month. Its 2002 target is Rp 42.8 trillion.
"The grand policy looks good: to sell assets now," banking analyst Lin Che Wei said on Wednesday. "But how they sell these assets is also important and on this (question) everyone seems to be turning a blind eye."
According to Che Wei, the massive sale program has made it easier for IBRA debtors to repurchase their assets using third parties like state banks and investment firms as fronts.
IBRA debtors are not allowed to buy back their assets unless they have repaid their debts to the agency.
The assets being sold consist mainly of bank loans that went bad and were transferred to IBRA when the 1997 economic crisis saw the banking sector nearly collapse under a mountain of bad loans.
IBRA also took control of stocks and properties belonging to the borrowers of these bad loans as part of the debt repayment process.
In total, it owns some Rp 600 trillion worth of assets after the government spent roughly the same amount in issuing bonds to keep the banking sector afloat.
But while investors previously bought IBRA assets individually, the massive asset-sale program has forced investors to now purchase them as packages. These are then categorized by value or the debtors to whom the assets formerly belonged.
And because of the difficulties in filtering out bad assets, the packages are sold at a discount of about 70 percent less than their nominal worth.
The leading buyers are securities firms and state banks.
Che Wei said debtors could seek bank loans to purchase the heavily discounted assets. "You can then use your assets as collateral to seek new loans," he explained.
He said he had met a debtor who lost his factory to a bank in 1996 and was recently approached by another bank to purchase the same factory from IBRA. "He was asked (by the bank) whether he wanted the factory back? -- We'll finance it."
Used as collateral at 100 percent of their value, the purchased assets could secure a debtor an even higher loan than the one used to purchase the assets from IBRA. The second loan would allow the debtor to refinance the first one, while still ending up with enough funds to pay the bank a handsome fee.
"Around 80 percent of the assets have been sold right back to their owners at just 30 percent of their price," said a businessman who declined to be named.
Economist Faisal Basri said these schemes were the natural consequence of a corrupt environment where political interests forced state institutions like IBRA to make cash contributions.
Che Wei added that along the way personal greed also set in, aggravating the scale of corruption.
IBRA has denied it is selling the assets back to debtors, arguing that it always checked the backgrounds of prospective buyers, and required them to state that they had no links to the debtors.
Previous asset-sale agreements also included a locked up period during which time investors were not allowed to resell their newly purchased assets.