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.