IMF demands greater transparency at IBRA

JAKARTA (JP): The International Monetary Fund (IMF) said on Wednesday that an independent body to oversee the Indonesian Bank Restructuring Agency (IBRA) must be established in a bid to ensure transparency and restore public trust in the agency.

IMF Indonesia representative John Dodsworth said on Wednesday that public trust was crucial for IBRA to succeed in restructuring the ailing economy.

"(IBRA) is important as a symbol for improved governance and transparency. If there is no trust in IBRA, then the economic program as a whole is in jeopardy," Dodsworth told a seminar.

He explained that the government needed to balance two conflicting aims between an urgency in moving to sell assets and restructuring debts, but at the same time ensuring the integrity of the process.

"There need to be effective checks and balances on IBRA's operations to ensure that the taxpayer is the true beneficiary, that asset values are maximized and that the actions of IBRA are not perverted into serving narrow political or commercial interests," he said.

"A new oversight body is needed that combines political support with independence of decisions and technical competency," he added.

Dodsworth said that the oversight role played by the International Review Committee (IRC), daily reporting to the Minister of Finance, obtaining clearance from the Financial Sector Policy Committee (FSPC) on large transactions and consultations with President Abdurrahman Wahid on policy issues were insufficient.

IBRA was created by the government in early 1998 to help restructure the country's ailing banking and corporate sector. The agency now controls over Rp 600 trillion worth of various banking assets surrendered by or taken from former bank owners and businessmen.

With the vast assets under its control, IBRA also plays an important role in stimulating foreign investment and financing the state budget.

The agency is targeted to raise some Rp 18.9 trillion in cash in the 2000 budget year.

But the large size of assets also opens the possibility for abuse and corruption.

IBRA was badly hit last year by the high profile Bank Bali scandal which allegedly involved several senior government officials.

There have also been reports of alleged misconduct by IBRA officials in the restructuring of assets.

Dodsworth said that the government's privatization program was also an important source to help finance the state budget.

He said that potential investors were looking for greater clarity in the government's privatization objectives.

"What investors are looking for is management control (in state companies)," he said.

He said that although in some sectors the government might be able to raise privatization proceeds without releasing majority control in state enterprises, in others it clearly was not capable of doing so.

He said that another objective of the privatization program was to promote increased efficiency, partly with changes in management.

The IMF is sponsoring the country's economic reform programs. Dodsworth said that the IMF's managing director Stanley Fischer was expected to come to Indonesia soon, followed by a team of experts to review the country's progress with the reform measures.

The IMF is expected to disburse a US$400 million bailout tranche in May, depending on whether it approves the reform progress.

Separately, Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said after a Cabinet meeting on Wednesday that Indonesia was considering changing the $400 million IMF payout to a standby loan.

He said that the change would allow the government to draw on the loan only when needed.

He said the standby loan would provide security for the country's foreign exchange reserves.

Kwik expressed optimism that the IMF would disburse the cash in the middle of next month because the government had completed almost all of the reform programs agreed with the IMF in January.

The IMF was supposed to disburse the loan earlier this month, but delayed it because the government failed to meet the end of March deadline to complete the various economic reform measures. (rei/prb)