IBRA faces challenging year ahead
Berni K. Moestafa, The Jakarta Post, Jakarta
Last week's reshuffle among senior Indonesian Bank Restructuring Agency (IBRA) officials was prompted by what its chairman said a tougher year ahead.
Pressure on the IBRA, regardless of suspicions that internal politics have been unseating corporate planning, motivated the reshuffle, according to IBRA Chairman I Putu Gede Ary Suta.
For one thing, he said, the IBRA's overall target in cash and bonds for the coming year has been raised to Rp 5.8 trillion (about US$558.5 million) to Rp 42.8 trillion.
"There is an increase in our targets, demand for faster (loan) restructuring, and for faster bank restructuring," said the chairman last week.
Underlying this sense of urgency is the short time left for the IBRA to complete its work before its sunset date on 2004.
The agency was founded in 1998 under the directive of the International Monetary Fund, or IMF, to restructure the Indonesian banking sector, which suffered severely from the 1997 financial crisis.
Its tasks are to restructure banks, recoup public funds that were spent to bail the banks out, and sell the loans IMF officials took over from banks.
As of today, however, the IBRA has managed to recoup just eight percent of the some US$60 billion spent on bailing out the banking sector.
This, in turn, begs the question: can IBRA officials catch up on the other $48 billion during the remaining three years to its sunset date?
What now lies ahead is a combination of problems, which analysts said have the potential to further slow the IBRA's work.
At its Asset Management Investment (AMI) unit, the IBRA is running out of strong assets to woo foreign investors.
"AMI has sold almost all of its Salim's assets -- so whose assets are they going to offer next?" Mirza Adityaswara, a banking analyst, said over the weekend.
He was referring to assets of the Salim Group, said by many to be among the better ones under IBRA's asset portfolio.
Among them is PT Bank Central Asia (BCA), whose sales must be completed this year.
Mirza said the IBRA needs to unlock assets from other groups that were either in legal limbo, or under dispute.
These include the assets of the Gajah Tunggal Group, with whose owner, Sjamsul Nursalim, the IBRA is still at loggerheads over the legality of the asset transfer.
The IBRA would also have to start selling unrestructured loans, as there was no time left to restructure them first, Mirza added.
Around one third of the $60 billion the IBRA took over in assets are in the forms of bad loans. Their restructuring and sales are managed by IBRA's Asset Management Credit (AMC).
But loan restructuring is costly, and time consuming. In the end, the process of selling restructured loans is not worth the effort that has gone into them, according to Mirza.
The IBRA claimed it had begun selling unrestructured loans -- albeit details of its progress are sketchy.
Another problem is that the IBRA is unable to verify the exact value of the loans it had taken over from certain banks.
Discrepancies in the loan amounts as claimed by banks, with those claimed by debtors are holding up the sale of IBRA loans.
Also, as a result of restructuring loans, the IBRA ended up owning shares and assets of indebted companies. These, too, must be managed, and then disposed off.
The IBRA plans setting up holding companies next year to optimize the sale of shares and properties it has acquired from debtors.
In the field of bank restructuring, IBRA must dispose stakes it owns in the 11 banks that were placed under its supervision.
Next to selling BCA, others most likely to follow are Bank Niaga, Bank Danamon and Bank Lippo.
The IBRA will also merge five of its weaker banks, which the agency apparently was unable to nurture back to health.
Consequently, the banks will need to be recapitalized, which will result in additional cost to the government. There is, further, the danger of producing a large unmarketable bank.
Elsewhere, the Singapore-based research firm, IDEAglobal.com, said IBRA must get investors to buy its assets to meet the high cost of bailing out the banking sector.
But, it warned, investors' appetite for IBRA assets was weak.
"The risk is, if sentiment does not improve and investors maintain their distance from Indonesia, then the stress could eventually nudge the (banking) sector to breaking point again before 2004," the research firm was quoted as saying by the news agency AFP last week.