IBRA's unstable leadership

IBRA's unstable leadership

The sudden replacement on Monday of Edwin Gerungan after
serving only about seven months as the chief of the Indonesian
Bank Restructuring Agency (IBRA) is simply further evidence of
the erratic leadership of President Abdurrahman Wahid. Frequently
changing the leadership of an institution with such an important
role in helping lead the nation out of its now four-year old
economic crisis defies all logic and is devoid of any common
sense. But then common sense and logic are not exactly among the
hallmarks of the beleaguered Abdurrahman administration.

How can the 40-month old IBRA, which manages more than Rp 540
trillion (US$54 billion) in state assets and is the nominee owner
of all the largest banks in the country perform well when its top
management undergoes a shakeup almost every six months?. How can
the agency maintain policy consistency and predictability, which
are vital to its dealing with investors and creditors?

Such a drastic move would certainly affect the working morale
and team spirit within the agency because a change in the top
management will usually be followed by shakeups among key members
of the working teams already nurtured by the previous leader.

The market hailed the appointment of Edwin, an experienced
banker of high integrity, as the fifth IBRA chairman last
November, believing that he possessed the courage to stand up
against intervention by vested political interests in day-to-day
operations.

But Gerungan seemed to have often clashed with Finance
Minister Rizal Ramli when the latter was still the chief
economics minister and head of the Financial Sector Policy
Committee (FSPC), the governing board of IBRA. Their working
relationship was made even less conducive because Edwin's
immediate boss, the then finance minister Prijadi Praptosuhardjo
(dismissed on June 12), did not enjoy good rapport with Rizal.

Edwin's days in IBRA were numbered when one of Rizal's
assistants at the FSPC revealed mid-last week that IBRA and the
previous finance minister Prijadi had undermined the debt
restructuring program by refusing to implement hundreds of deals
already approved by the FSPC. Rizal implicitly announced a no-
confidence vote in Edwin last Thursday when he asserted after a
meeting with Vice President Megawati Soekarnoputri that IBRA
needed changes to speed up its asset sales and debt restructuring
process.

True, the economy will never achieve a strong foundation for a
sustainable growth unless IBRA completes its two most important
programs.

But one finds it hard to understand why almost four years
after IBRA's establishment, the economic team of the Cabinet
cannot yet speak the same language in assessing the agency's
programs. Whatever their reasons, the outright refusal by IBRA
and the previous finance minister to execute debt restructuring
deals already decided is damaging to investors' and creditors'
confidence in the agency. Any differences of views should have
been settled outright. Simply casting aside deals already agreed
on was totally unprofessional.

It goes without saying that the longer the Rp 280 trillion in
bad debts taken over by IBRA from closed and nationalized banks
remain unsettled or unrestructured, the worse would be the
economy's bleeding as the debtor companies would remain
inaccessible to new credit lines. Likewise, the longer the Rp 260
trillion worth of properties and ongoing companies remain under
IBRA management, the more likely it is that the companies would
deteriorate.

This will be the greatest challenge facing the new chairman
Putu Ary Suta, former chairman of the Capital Market Supervisory
Agency (Bapepam). An accountant by training, Putu is the first
chief of the agency without previous experience in the banking
industry. But it was comforting to note his first statement after
his installation on Monday afternoon where he pledged to
accelerate asset sales and debt restructuring.

But Putu's tenure at IBRA might also end abruptly unless the
government gives him clear-cut guidelines and sets clear
yardsticks to assess IBRA's performance. Without firm and
politically-accepted guidelines for asset sales and debt
restructuring, IBRA deals would always be vulnerable to public'
suspicion of corruption, cronyism and collusion and to attacks
from the highly assertive House of Representatives.