Mon, 09 Oct 2000

IMF, WB want fairness in corporate debt workout

JAKARTA (JP): The International Monetary Fund (IMF) and the World Bank (WB) on Saturday called on the government to be nondiscriminatory in implementing its corporate debt restructuring program.

The multilateral lenders said establishing clear and consistent principles would help accelerate the Indonesian Bank Restructuring Agency's (IBRA) debt resolution efforts in the long run.

"We agree with your position that all corporate debt restructuring arrangements with IBRA be handled in a nondiscriminatory manner. An agreed set of principles and processes should not only apply to Texmaco, as you work out the details of the memo of understanding, but also to other cases," the IMF and the World Bank said in a letter delivered on Saturday to the Coordinating Minister for the Economy Rizal Ramli.

A copy of the letter was made available to The Jakarta Post.

The letter, jointly signed by World Bank country director in Indonesia Mark Baird and IMF Jakarta representative John Dodsworth, was written following media reports that the two institutions had urged the government to review the debt restructuring plans made for textile conglomerate Texmaco group by seeking a second opinion from international consultants.

In a letter dated Sept. 29 to Rizal, the IMF and WB reportedly warned that the debt workout for Texmaco could set a bad precedent and prove costly for taxpayers.

But the WB and the IMF said in the Saturday letter that the two institutions were neither endorsing nor criticizing any particular asset restructuring proposal.

"We are not in a position to do so, nor would it be appropriate. What we are doing, and have done consistently in the past, is to draw attention to the principles and processes that should guide these decisions, as embodied in the government's various letters of intent with the IMF," Baird and Dodsworth said in the letter.

In response to the IMF and WB criticism, Rizal lashed out on Friday at the two institutions, saying that they were discriminatory by only questioning the Texmaco restructuring plans.

"Why has the IMF (and the World Bank) only questioned the Texmaco deal. Why don't they also question the others, including the Salim Group," Rizal told reporters.

The Salim Group is the founder of Bank Central Asia (BCA), which owes the government some Rp 53 trillion (US$6.1 billion), but has only surrendered assets worth about Rp 20 trillion under a deal made with the previous administration. The current government has demanded Salim inject additional assets.

Rizal stressed that the government would not be discriminatory in implementing the country's corporate debt restructuring program.

The Financial Sector Policy Committee (FSPC), which comprises several economic ministers, approved last Monday evening the proposals from IBRA to restructure the debts of Texmaco, Tirtamas, Kali Manis and Banten Java Persada groups, which are worth more than $3.7 billion.

The restructuring plans have been criticized by analysts as a a government bailout.

The IMF has cited the restructuring of about Rp 260 trillion ($29.8 billion) in corporate debts taken over by IBRA from closed and nationalized banks as a vital element of the reform program to accelerate economic recovery.

The government has yet to provide details on the restructuring plans, particularly the structure of the exchangeable bonds. The government has also insisted that the restructuring plans were not a bailout. (rei)