IBRA says Bank Niaga deal to be clinched this Friday

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.