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)