Intelligence chief urges quick decision on debt extension plan
Intelligence chief urges quick decision on debt extension plan
Berni K. Moestafa, The Jakarta Post, Jakarta
Chief of the State Intelligence Agency (BIN), Hendropriyono
urged the government to immediately finalize the revision of a
controversial debt payment extension plan, warning indecisiveness
would trigger a backlash from the public.
He said the present scheme to allow huge debtors of the state
a longer payment period, had already provoked negative public
reactions.
Hendropriyono did not say what the reactions were but warned
that "if the government doesn't do anything, that's bad."
His statement comes amid lingering uncertainty over the review
of a debt extension plan, which has invited public criticism.
"When the government came out with the revised debt payment
scheme, it sparked public reaction. This, of course I reported to
the President and the DPR (House of Representatives)," he was
quoted as saying by Antara on Wednesday.
Warnings of a "public reaction" adds pressure to scrap the
current debt payment extension scheme, after signs that the
government itself was divided over the issue. In addition the
International Monetary Fund (IMF) said legal certainty instead of
a payment extension was the key here.
Last December, the Financial Sector Policy Committee (FSPC)
approved a revised debt payment scheme for debtors of the
Indonesian Bank Restructuring Agency (IBRA).
Proposed by IBRA, the plan extends the debt payment period to
10 years from four. It effectively lowers the interest rates to a
minimum of nine percent from around 16 percent, well under Bank
Indonesia's benchmark rates.
The plan applies to several former bankers, whose banks the
government bailed out after the impact of the 1997 financial
crisis.
The government had issued some Rp 630 billion (about US$63
billion) worth of bonds to save the local banking sector from
total collapse.
However, an audit later revealed that bankers abused Rp 138.4
trillion of the funds. To escape prosecution, they surrendered
their banks to IBRA and agreed to settle their debts within a
four-year period.
Three years on however, IBRA was yet to see one rupiah of
that. Resorting to legal action proved futile, since it turned
out that IBRA's contracts with debtors lacked legal power.
As the deadline for most debtors drew near, IBRA offered late
last year the controversial extension and softer interest rates.
This drew fire from the public. Analysts and legislators
criticized the government for siding with the wealthy debtors
instead of the public, who effectively owns the money.
The government revealed the debt extension plan at the same
time that it raised fuel, electricity and telephone prices.
Due to the price hikes, inflation soared last month and
worsened purchasing power for consumers.
State Minister of National Development Planning, Kwik Kian Gie
further argued that the debt extension plan would not necessarily
ensure payment.
An interministerial team is now at work on the plan, however
critics demanded that the government scrap the plan altogether.
The small team was supposed to present its conclusions before
a Cabinet meeting last Monday, but did not.
"One can do the right thing or the wrong thing, but to do
nothing is wrong for sure," Hendropriyono added.
Elsewhere, the IMF ended its two-week review on Indonesia's
reform progress, reminding the government to do more to reclaim
its money from IBRA debtors.
"Discussions were held with the authorities on the need to
enhance recovery from the shareholder settlement agreements with
former bank owners," it said in a statement.
The IMF urged the government to form a clear strategy to cope
with the debtors, reiterating that legal certainty was vital.
"Strengthening compliance as well as securing legal certainty
for both the government and former bank owners must be integral
elements of the strategy," it said.