IFC investment in RI still suspended
IFC investment in RI still suspended
Berni K. Moestafa, The Jakarta Post, Jakarta
The International Finance Cooperation (IFC), a commercial arm
of the World Bank, said on Friday it would maintain its
investment suspension on Indonesia, until it saw concrete
improvements in the country's legal environment.
The IFC regional representative for Indonesia, Amitava
Banerjee said a number of incidents involving legal cases had
prompted it to suspend investment programs since last March.
"At the moment our program is under review, meaning we are not
doing any investment," he told reporters after a meeting between
businessmen and the government.
According to him, the institution has an investment exposure
of some US$720 million in Indonesia.
The suspension in March came just a month after an IFC
executive said he was confident that the IFC would continue
investing here albeit under a poor legal environment.
The IFC itself has been embroiled in legal disputes involving
two companies it had invested in.
Of the two cases, the one concerning PT Panca Overseas Finance
Indonesia (POFI) has dealt the most serious blow to IFC.
An appeal to bring POFI to bankruptcy was rejected by the
commercial court last January, due to what the IFC suspects were
fictitious creditors voting in favor of POFI.
The IFC filed a bankruptcy petition against POFI last year for
unresolved debts amounting to $13 million.
IFC suspected POFI fabricated 14 of its 31 creditors,
allotting them Rp 1.6 trillion (about $152 million) of its $230
million in total outstanding debts.
It said the move enabled POFI to win the creditors' vote for
accepting its debt restructuring proposal.
Other creditors share similar experiences, notably, the
Indonesian Bank Restructuring Agency (IBRA).
Only a few creditors have been able to book victory in
bankruptcy cases since a new bankruptcy law was enacted in 1998.
This situation has increasingly worried investors in need of a
credible commercial court to ensure the safety of their funds.
Banerjee rejected the notion that the POFI case had been the
basis of its decision to suspend investment.
"There are some incidents were you can point and say that the
legal environment needs to be fixed," he argued.
Indonesia is IFC's seventh largest country portfolio.
Given that its task is to promote investment in developing
countries, a suspension on Indonesia may deter pure commercial
foreign investors from entering the country.
But Banerjee added that some improvements had been visible in
recent court decisions.
"There are some good cases that have come out when the court
has made sensible decisions," he said.
He acknowledged that reforming the legal system could take
years, yet the IFC needed only the first concrete signal of
progress.
"It could take 10 to 20 years, but you can start a long
journey by going in the right direction with one step -- we await
that one step," he said without elaborating.