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.