IBRA gets new chief

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.