Indonesian debt team to meet creditors in Tokyo

Indonesian debt team to meet creditors in Tokyo

JAKARTA (JP): The government-appointed private offshore debt
team and international creditor banks will meet in Tokyo on May
7-10 to discuss a broad agreement to restructure the country's
huge private debt.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said yesterday he would attend the debt
restructuring meeting during his visit to Japan next week.

"I hope the next meeting on the private debt problem will be
able to build on progress made at the previous meeting in New
York," Ginandjar said after attending a consultative meeting
between President Soeharto and the speaker and faction leaders
from the House of Representatives at the Bina Graha presidential
office.

The two parties agreed to a general framework when they last
met in New York on April 15 and 16.

At the New York meeting, Indonesia put forward a plan to
restructure its mammoth US$68 billion private debt based on the
Ficorca program used by Mexico in the early 1980s.

The chairman of the private offshore debt team, Radius
Prawiro, said Thursday evening that the government would soon
form the Indonesian Debt Restructuring Agency (INDRA) which would
function like Ficorca.

"The government prefers to use their own name rather than
adopt a foreign name like Ficorca," Radius said.

The Mexican program allowed companies to repay foreign debt in
pesos to Ficorca, which then paid foreign creditors in dollars.
By doing so, the Mexican government did not technically assume
responsibility for the loans, only the foreign exchange losses.

On Thursday, the team will meet with the co-chairman of the
steering committee of creditors. The full meeting with creditors
is scheduled to start on Friday.

Meanwhile in New York, bankers said Indonesian corporations'
international creditors were in place and completing reports to
present in Tokyo next week.

"The subcommittees are doing good business and are preparing
updates on the work done," a banking source told Dow Jones
Newswires.

Four separate subcommittees have been formed -- one to deal
with a plan to restructure Indonesia's corporate debt, one to
gather key economic data, another to look at trade finance and a
fourth to focus on inter-bank lines and the money market.

A banker said members of the subcommittee on economic data had
met with the International Monetary Fund (IMF) in Washington and
officials in Jakarta in an attempt to gather data.

The IMF is expected to approve the release of one of a series
of three monthly outlays to Indonesia next Monday. The funds are
part of a $43-billion aid package arranged for the country by the
IMF.

Banking sources said the subcommittee working to restructure
Indonesia's corporate debt had reached a "consensus about what
types of things banks want in there", and would forward a report
to the full steering committee Friday.

Commenting on Indonesia's stated goal of keeping local
interest rates high to support the currency, a banking source
said, "They are still trying to talk the rupiah up to Rp 6,000
(rupiah to the dollar), but they have a long way to go."

Under the Indonesian proposal, the exchange rate would be
determined by market forces. The exchange rate would be
determined by taking the lowest in a series of 20-day rolling
averages of the rupiah value during a six-month eligibility
period. The stronger the currency during that period, the lower
the government subsidy.

The rupiah closed at Rp 8,000 to the dollar on the spot market
yesterday, almost unchanged from Thursday.

Bankers reiterated that the payment of about $700 million in
trade finance arrears owed to foreign banks by Indonesian banks
is crucial to the negotiations.

"This will be a hot topic at the next meeting," a banker
predicted.

Bank Indonesia Governor Sjahril Sabirin said last week that
the government would settle the arrears, which the central bank
agreed to guarantee in January. But so far no payments have
materialized, bankers said. (prb/rid)