IFC's Peter Woicke urges govt to fix legal system

IFC's Peter Woicke urges govt to fix legal system

JAKARTA (JP): Visiting executive vice president of the
International Finance Corporation (IFC) Peter Woicke called on
the government on Friday to continue to fix the country's legal
system to help revive investor confidence in the economy.

But Woicke added that the IFC would continue to provide
financing for local companies despite its "frustration and
disappointment" over certain bankruptcy court rulings.

"Domestic and foreign investors will suffer if the legal
system does not work within a legal framework," he told a press
conference.

"Our experience in Indonesia has been so far relatively
good ... (But) I should be honest with you that we have also been
very frustrated and disappointed in some cases ... we have
invested in," he said.

IFC is currently involved in legal disputes with PT Panca
Overseas Finance Indonesia and the now defunct PT Dharmala Sakti
Sejahtera in the bankruptcy court.

"There are a number of people who suggested that, with (the
two above cases) in limbo, that perhaps we should not invest new
money in this country. But I personally believe that the role of
the IFC goes beyond one or two court cases," Woicke said.

"As a development bank we'll continue to take risks, because
if we won't take risks, we can't fulfill the development role of
the IFC," he added.

The controversy over the Panca case centers on last month's
decision of the Jakarta Commercial Court which dropped a
bankruptcy petition made by IFC against Panca, and instead
ratified the company's debt restructuring program.

The court decision was made after a majority of creditors
backed the plan.

But IFC appealed the ruling on grounds that many of the
creditors were bogus companies.

Panca owes around US$13 million to IFC out of the company's
total debt of $235 million. The World Bank's private sector
lending arm filed the bankruptcy petition in September last year
after negotiations failed.

Only a few creditors including the Indonesian Bank
Restructuring Agency (IBRA) have won bankruptcy cases since the
new bankruptcy law was enacted in 1998.

IFC's investments, comprising both debt and equity, in
Indonesia stood at US$844 million as of the end of last year.

IFC had no specific target on the size of its investment plan
in Indonesia, but it said that the limit per country was $1.3
billion.

IFC has been involved in a number of corporate restructurings,
including PT Ades Alfindo, PT Semen Andalas, PT Santika Hotels,
South Pacific Viscose, and PT Argo Pantes.

It has also invested equity funds in publicly-listed Bank
NISP.

Elsewhere, Woicke also called on the government to stick to
the International Monetary Fund economic reform program to
maintain investor confidence in the country.

" It is our strong conviction that it is important for the
country to stick to the IMF program," he said.

Coordinating Minister for the Economy Rizal Ramli has
complained that the IMF was pressing it too hard, saying it was
difficult to implement all reforms while the country was going
through an unruly transition.

But Woicke said that the IFC assistance would not necessarily
be linked to the IMF.

The IMF has pledged to the current administration some US$5
billion in loans early last year under a three-year program. So
far, the Fund has disbursed around $1 billion.

It delayed late last year the disbursement of another $400
million due to the concern over the government-proposed bill on
the amendment of the central bank law, and the new fiscal
decentralization policy.

Sumitomo

In a related development, the IFC and Sumitomo Bank Ltd agreed
here on Friday to extend a US$125 million trade facility to
support Indonesia's imports.

The IFC would guarantee 40 percent of each transanction
covered under the facility up to $50 million, while Sumitomo Bank
acting as the confirming bank, would shoulder 60 percent of the
risk in each transaction, it added.

Visiting IFC executive vice president Peter Woicke, who signed
the agreement said the facility would help build confidence in
the Indonesian banking sector.

"Through the facility, IFC can reach many businesses in
Indonesia," he added.

He also said the IFC was considering participation in other
projects that would strengthen Indonesia's economy and restore
investor confidence.

Sumitomo in a separate statement said that the bank and IFC
would jointly refinance and/or confirm import L/Cs issued by
selected local commercial banks, when Indonesia private companies
import goods from foreign markets.

The Japanese bank expected the facility would help activate
overall trade business into and out of Indonesia because it would
guarantee L/Cs issued by local banks which have limited access to
trade facility.

On Thursday, IFC also signed a similar agreement with Standard
Chartered Bank (SCB) to provide Indonesia with the same amount of
trade facility. (rei/03)