IBRA says Bank Niaga deal to be clinched this Friday

Fitri Wulandari and I Wayan Juniartha, The Jakarta Post, Denpasar, Bali

The Indonesian Bank Restructuring Agency (IBRA) said it was expecting to sign an agreement this Friday with Malaysia's Commerce Asset Holding Bhd for the sale of a 51 percent stake in Bank Niaga.

IBRA chairman Syafruddin Temenggung said on Tuesday that the agency and Commerce had cleared the remaining obstacles to Bank Niaga's sale.

"We've wrapped up the four pending issues and an SPA (sale and purchase agreement) can be signed this Friday," Syafruddin told The Jakarta Post on the sidelines of a meeting between IBRA and investors in Bali.

The sale would yield the government Rp 1.05 trillion (about US$114 million), as Bank Niaga's price has been set at 26.5 rupiah a share.

IBRA owns a 97 percent stake in Bank Niaga after the government injected the bank with recapitalization bonds to offset bad loans resulting from the 1997 economic crisis.

The agency has been trying to sell Bank Niaga since early this year as part of a wider program under the International Monetary Fund's (IMF) economic reform package.

Syafruddin said one of the pending issues that had stalled negotiation revolved around the government's blanket deposit guarantee scheme.

The scheme requires banks to pay a certain amount in fees in return for which the government covers their third party liabilities. The scheme is aimed at instilling public confidence in the fragile banking industry which would have otherwise been prone to bank runs.

The scheme is mandatory for local banks, but Syafruddin said Commerce was exempted from joining the scheme after it objected to the requirement.

Another contentious issue centered on IBRA's assignability right, which allows the agency to sell a bank to whatever party or in whatever manner it deems fit, without requiring the other shareholders' approvals.

IBRA wants to sell the remaining shares in Bank Niaga through the stock market, a plan to which Commerce originally objected but later agreed to, said Syafruddin.

The other two issues concerned Bank Niaga's boards of directors and commissioners. Syafruddin said Commerce demanded the right to appoint its own president director, who would then appoint the bank's board of directors. The Malaysian investors were also seeking the right to appoint the chief commissioner.

IBRA, on the other hand, wanted the appointment of management to be based upon Bank Niaga's shareholding composition.

The agency backed down, Syafruddin said, but it had secured at least one seat on the banks' board of directors.

IBRA is pushing ahead with the Bank Niaga sale despite a number of controversies that have marred the process.

Two legislators from the country's largest political party, the Indonesian Democratic Party of Struggle (PDI-Perjuangan), publicly claimed that IBRA had offered them and their colleagues $1,000 bribes to approve the Bank Niaga sale. IBRA denied the charges and a police investigation has come to naught so far.

Some legislators have been rejecting the sale, arguing that Bank Niaga was being kept alive with publicly funded interest earnings from its recapitalization bonds.

Meanwhile, Syafruddin said that as of October this year, IBRA had secured Rp 40 trillion out of its 2002 revenue target of Rp 45.6 trillion.

IBRA has amassed some Rp 600 trillion worth of assets taken over from ailing banks and companies following the economic crisis. Its task is to sell these assets and return them to the private sector.

The proceeds of these sales are used to help the government plug its chronic state budget deficit.