IBRA taken to task on property bad debt bind

IBRA taken to task on property bad debt bind

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
has failed to make significant progress in restructuring bad
debts of property developers since assuming them two years ago,
property expert Panangian Simanjuntak said here on Wednesday.

The founder of the Panangian Consulting Group blamed the
agency for the slow pace of the debt restructuring. He charged
officials with not only lacking knowledge and experience in the
property market, but also failing to realize the urgency of the
situation.

"IBRA officials have insufficient knowledge about property.
This is why they are so indecisive and often afraid to make
decisions."

IBRA has completed the restructuring of about 10 percent of
the total debts of property developers, he added.

The agency has taken over some Rp 217 trillion in bad loans
from state and private banks. About Rp 40 trillion of the amount
was owed by property developers, who were required to surrender
their assets as the collateral on the bad debts.

Panangian said the agency's officials should focus on the
property sector and apply the proper method of restructuring for
borrowers in the property sector.

One effective alternative of restructuring, he said, was
through a sale of the borrowers' property assets.

For the best results, Panangian said, asset sales through an
auction should only apply to those with a value of Rp 500 million
or below.

He said high-profile assets such as hotels or other commercial
property should be sold in closed-door negotiations and
transactions as the buyers of the assets usually avoided media
exposure.

"The potential buyers of an expensive painting compete to win
their bid for prestige, but it is not so with the buyers of high-
profile properties like a hotel. They want to do it on the
quiet."

Panangian said IBRA needed to have both macro and micro
policies in ensuring that its property sales attracted foreign
investors.

In the macro policy, IBRA should cooperate with the
coordinating minister of the economy, finance and industry in
providing a more conducive government policy on foreign
investment in property.

"The government could perhaps issue a decree temporarily
banning construction activities, or any new issuance of land
titles for commercial properties for the next 10 years, for
example."

He said such a move would be a tacit guarantee by the
government that there would not be an increase in supply in the
commercial property market for sometime.

"If this worked, it would create positive market sentiment
which in turn would gradually bring up property prices as the
growth of the property supply would be kept limited."

He added there should be new measures by the government to cut
bureaucratic red tape for foreigners making property purchases.

"Land ownership by foreigners should be based on stronger
regulations and law." He said the government should eliminate its
reluctance toward foreigners owning local property.

In the micro side of the policy, IBRA should be able to act as
a better salesman and apply the necessary marketing gimmicks.

"IBRA should go abroad to join the international property fair
and clearly announce that Indonesia is opening its property
market for foreigners," he said.

Panangian said Asian investors, particularly from Singapore,
Hong Kong, Taiwan, South Korea and Japan, would be at the
vanguard of foreigners coming here in great numbers from 2001
until 2002 for property purchases.

"These countries know Indonesia better and have more business
networks with the businesspeople in the country," he said.

The next group, he said, would be from the United States,
Europe, the Middle East and Australia, set to arrive in 2003 and
2004, he said.

"The recovery of the property sector in Indonesia can be
considered a success if the country could make foreign investors
come here," he said.

"The property sector in Indonesia collapsed because of the
sector's U.S. dollar debts. Now we need foreign buyers with their
fresh dollars in hand to come here to fix the problem." (udi)