IBRA's poor peformance hurts confidence: Bank

IBRA's poor peformance hurts confidence: Bank

Dadan Wijaksana, The Jakarta Post, Jakarta

As in the last two years, investment will remain hard to come by
this year, according to Citigroup Asset Management, partly due to
the lack of credibility in the government privatization program
and the sale of assets under the Indonesian Bank Restructuring
Agency (IBRA).

Vice president of Citicorp Investment Bank (Singapore) Ltd.
Edwin Chungunco said on Wednesday that the slow progress in both
programs had created uncertainty and raised the risk of making
investment in the country.

"They're not convinced that IBRA is doing its job properly.
Investors worry about the high risks they might face when
entering the Indonesian market," he said.

"FDI (foreign direct investment) will flow quite low this
year, unless IBRA can do something about it," he added.

IBRA is mandated to sell assets it took over from troubled
banks in 1998 to raise cash to help finance the state budget
deficit. But some of the asset sales have been mired in
controversy. One such example is the sale of carmaker PT
Indomobil Sukses Makmur late last year to a consortium-led by Tri
Megah Securities. There have been allegations that former owner
Salim Group was behind the transaction. The government has barred
the Salim Group from repurchasing its assets from IBRA. The
country's antimonopoly watchdog (KPPU) is currently investigating
the transaction with a possibility of issuing a recommendation to
cancel the deal.

The agency is currently in the process of finalizing the sale
of the government majority stake in Bank Central Asia (BCA). But
one of the bidders, U.S.-based Farallon Investment, had
threatened to pull out from the bid amid concern of unfair
practice in the tender process. There have been accusations that
IBRA is favoring a certain bidder.

A successful sale is crucial to prove that the government is
serious in implementing the economic reform program. The sale
process itself has been delayed several times partly due to
meddling politicians.

The government privatization program suffered a serious blow
late last year when the sale of a majority stake in cement maker
PT Semen Gresik was blocked by employees and local politicians.

With investment out of favor, the country's economic growth
this year would rely on strong domestic consumption.

High consumer spending was the prime mover of the country's
growth last year amid drops in investment and exports.

Chungunco, however, was of the opinion that this year,
domestic consumption would take a back seat to exports, which
would start to pick up in the second semester of the year, in
line with the expected quick recovery of the global economy, led
by the U.S.

The U.S. is Indonesia's main export destination.

The government has targeted the economy to grow by 4 percent
this year on the back of strong domestic consumption. But
Citigroup had a lower growth forecast of 2.9 percent.