IBRA to speed up Indonesia's economic recovery

IBRA to speed up Indonesia's economic recovery

Dadan Wijaksana, The Jakarta Post, Jakarta

Newly-installed Chairman of the Indonesian Bank Restructuring
Agency (IBRA) Syafruddin Temenggung aims to boost the role of the
agency in accelerating the recovery of the country's economy.

While admitting that the agency has been slow in nurturing the
banking sector back into financial health -- which will make it
the catalyst for recovery -- Syafruddin stressed that efforts
could be done to speed up the process.

"IBRA was established with the main goal of being the agent of
(economic) recovery. So, we have to make that happen before, or
at least, at the same time IBRA's mandate expires," Syafruddin
said on Tuesday.

He also vowed to apply a working system that is consistent
with good corporate governance (GCG).

GCG essentially means that each action and decision taken
should be transparent, liable and accountable to avoid disorder
and abuses of power.

Syafruddin was speaking to reporters during his first formal
press conference since he was named last week as the new chief of
the powerful agency, replacing I Putu Gede Ary Suta, who had been
criticized particularly by State Minister of State Enterprises
Laksamana Sukardi for being too aggressive in meeting state
budget targets at the expense of transparency.

Laksamana's ministry oversees IBRA.

IBRA, set up in 1998, has until February 2004 to complete its
job. It took over some Rp 645 trillion (about US$64 billion)
worth of assets from troubled banks and indebted ex-bank owners.
It is mandated to restructure the assets and sell them to
investors to accelerate economic recovery.

With IBRA now controlling the ailing banking sector,
restructuring them would be significant in improving their
intermediation functions to industries, thereby theoretically
enabling the country's economic wheels to get rolling again.

The government, through IBRA, issued a huge amount of bonds in
the late 1990s to help the banks, which was one of the most
costly bank bailout programs ever. This has also made IBRA the
majority owner in the banks. The agency now must restructure this
group of banks and put them on the road to better health.

However, after more than four years of existence, IBRA has yet
to succeed in bringing the banking sector to where it is supposed
to be.

Critics have argued that the agency has been too focused on
its efforts to sell off assets in a bid to reach state budget
targets, the proceeds of which are to be used partly to offset
the huge government deficit.

That has put bank restructuring, which is in fact the reason
for IBRA's existence, far behind schedule.

According to Syafruddin, the bank restructuring had been slow
also due to an unending debate on how to settle the obligation of
indebted former bank owners to the government.

"That debate has been time consuming. We have spent almost all
our energy ...," Syafruddin said.

Syafruddin was the secretary of the powerful Financial Sector
Policy Committee (FSPC), which groups senior economists and has
the final say on IBRA's major bank restructuring and asset sales
programs.

The former bank owners owe around US$10 billion in debts to
the government after their banks received liquidity support in
the wake of the 1997 financial crisis.

But most of these once powerful owners have been uncooperative
in settling their obligations.

Ary Suta had been widely criticized for proposing a
restructured repayment plan which clearly favored the ex-
bankowners.

The progress of the case is now in the hands of a team of
legal experts, who are tasked to research each of 33
uncooperative debtors -- former bankers -- and to provide
recommendations on what legal measures can be taken against them.