IBRA faces challenging year ahead

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.