IBRA gets new chief

The market should be pleasantly surprised by the official confirmation on Friday that Edwin Gerungan, a former Citibank Indonesia executive, and not the widely-tipped former state banker Widigdo Sukarman, will replace Cacuk Sudarijanto as the chief of the Indonesian Bank Restructuring Agency (IBRA). The naming of Edwin as the fifth chairman of the 32 month-old agency should bring a sigh of relief to the markets.

Many had feared that President Abdurrahman Wahid would push ahead with his first choice, Widigdo, even at the risk of further erosion of market confidence, as he did with his appointment of Prijadi Praptosuhardjo as the new finance minister in August.

Should Widigdo have stepped into Cacuk's shoes, as widely tipped by close aides to the President, Abdurrahman would have succeeded in putting state assets worth as much as 80 percent of the gross domestic product under the control of two questionable personalities.

Widigdo, who recently failed to pass a fit-and-proper test of technical and ethical competence to be reappointed chief executive officer at state Bank BNI, would have been in control of Rp 600 trillion (US$67.5 billion) in state assets or around 40 percent of gross domestic product currently under IBRA management.

Prijadi, who failed a similar test earlier this year to become chief of state Bank Rakyat Indonesia but was nevertheless appointed as finance minister in August, is ex-officio in charge of overseeing all state companies with combined assets of around Rp 165 trillion.

Even though Edwin, currently a member of state Bank Mandiri management, has yet to prove his worth, the announcement should be viewed positively by the market amid mounting opposition to Abdurrahman's barely year-old rule and sharp criticism of his failure to breathe life back into the economy.

A positive market reaction could be a psychological boon for Edwin to lead IBRA, which is responsible for reviving the banking industry, restructuring the corporate sector and for raising money to help plug a large budget deficit. His 20 years experience with Citibank Indonesia and his nonaffiliation with any political organizations will help him push through the difficult, often delicate process of debt restructuring with politically well-connected business groups.

The timing of Edwin's installation at IBRA could not be better. Last month the agency came under fire from domestic and foreign analysts, including those of the World Bank and International Monetary Fund, for making asset-for-debt deals with four business groups that were widely regarded as unfavorable to the state. A public hearing between IBRA chairman Cacuk and the House of Representatives Commission in charge of state finances revealed on Wednesday evening that some of the agency's expenditures were highly questionable. Employing a number of supposedly independent analysts on its payroll with monthly honorariums of between Rp 5 million and Rp 10 million but without clear assignments shows the agency does not have any sense of austerity. The questionable expenditures also reveal that the agency does not follow the good corporate governance practices that it is imposing under its corporate restructuring program.

Hopefully, Edwin's term will be long enough for him to establish a good, strong system for managing the resurrection of the banking industry, resolving the huge corporate debt overhang and rejuvenating the paralyzed business sector. Stability and continuity in top management is essential to the agency whose importance in leading the nation out of its economic crisis is undeniably paramount.

Like his predecessors, Edwin's greatest challenge to success will be facing a succession of barriers not only from powerful businessmen who will stop at nothing to get the most favorable debt workout but also from his own boss (President Abdurrahman) who is notorious for his frequent reversals on important economic matters. However, we are confident that being a respected professional, Edwin will put the public's interests and his integrity ahead of his personal career ambitions and will therefore have the courage to stand up against any lobbying or irrational directives from vested-interest political leaders.