Intricate BCA sale racing against time

Intricate BCA sale racing against time

Riyadi Suparno, The Jakarta Post, Jakarta

The Salim Group is lurking behind the scenes, ready to grab
its former jewel in the crown, Bank Central Asia. That's the
warning given by various quarters to the government in the sale
of its controlling shares in the bank.

The government has announced that it has long banned the Salim
Group from buying back the bank. Bank Indonesia, which supervises
commercial banks, has also been murmuring the same tune.

However, both the government and the central bank have not
been able to guarantee that Salim will not return to BCA.

Worse still, they have refused to announce what they would do
if Salim eventually bought BCA through various fronts, including
nominees currently bidding for BCA shares.

The reality speaks for itself.

When Salim refused to honor an order from the central bank to
discharge its remaining stake of around seven percent in BCA, no
action was taken against Salim.

This shows that the central bank is powerless against Salim.

Therefore, before it gets too late to correct, the best thing
the government and the central bank could do is to prevent Salim
from entering BCA and to select the best investor for the bank.

The imbroglio surrounding the shoddy sale of automotive
company Indomobil Sukses Internasional should serve as a good
lesson for the government not to repeat its mistake when selling
assets, in this case BCA.

Assuming that the government and the central bank all have
good intentions, they must jointly pool their efforts in selling
BCA, which includes the selection of bidders.

Conducting the sale separately according to their scope of
authority will only open loopholes for Salim and other
unqualified bidders to grab the bank.

The reality now is that the nine consortiums bidding for BCA
have not yet finalized the members of their consortiums. They
have also not even given proof that they have the money to buy
BCA.

This reality will only spark speculation that the doors are
still wide open for Salim to regain BCA.

If the consortiums bidding for BCA are not required to state
their members, the bad experience concerning Indomobil is likely
to repeat itself. Nobody knew who were behind Trimegah
Securities, the winning bidder for Indomobil, until Trimegah
announced it only on Monday.

If this happens with BCA, Salim or other problematic domestic
conglomerates, along with former government officials and
generals, will easily get into BCA.

Another disturbing fact is that bidders are not (or not yet)
required to give proof that they have the money to buy BCA.

This again will provide added leeway for Salim or other
unqualified investors to snatch BCA.

One analyst scrutinizing the sale of BCA has identified six
out of the nine bidders as prone to being used as a front by
Salim and its cronies.

They are suspected of having no available capital.

With no requirement to prove their funding, Salim or others
will find it easy to ride on the back of these six bidders, only
being required to place money on the table after any of the six
bidders wins.

This reality should alarm the government and the central bank,
which only have until Jan. 28 to correct the situation.

On the government's side, the Indonesian Bank Restructuring
Agency (IBRA) and the Capital Market Supervisory Agency (Bapepam)
must first of all work together to scrutinize the bidders.

All and all, the correction process should start with IBRA.

IBRA should first of all require all bidders to prove that
they have the money to purchase BCA. Such proof could be in the
form of a bank guarantee or an escrow account.

If all bidders were required to provide proof of funding, this
would automatically reduce the number of bidders.

Bidders suspected to be used as a front by Salim would
automatically be kicked out; Salim would not be able to provide
funds six times larger than the amount needed to buy BCA.

By requiring proof of funding, Salim would likely put their
money in one bidder only.

After that comes the role of Bapepam.

Bapepam, as a capital market watchdog, must eliminate the
possibility of nominees, trusts, private capital or other
vehicles being used by Salim to buy BCA.

Bapepam chairman Herwidayatmo has promised to produce a ruling
on the nominees.

Herwid, however, argued that his party could not issue such a
ruling as it was not required by the Capital Market Law, unless
there was a request from Bank Indonesia.

Consequently, such a ruling has never been issued, while the
deadline for the bidders to hand over their final bids is fast
approaching, Jan. 28.

Without such a ruling, it would be impossible to prevent Salim
from buying BCA through a nominee.

The absence of such a ruling would complicate the effort of
the central bank in conducting fit and proper tests for the
bidders.

People appearing before the central bank for the tests could
be different from the real investors, who might be blacklisted by
the central bank.

The fact that the consortiums have not yet finalized their
members will only add to the complication of such fit and proper
tests.

To safeguard the sales of BCA, Bank Indonesia should ask
Bapepam to make a regulation on nominees and also ask IBRA to
require all the bidders to finalize their members.

This way, the central bank would be able to carry out fit and
proper tests to ensure that the real investors bidding for BCA
were the right people.

If Bapepam and IBRA are unable to meet the demand, the central
bank could still do its job well by imposing tighter tests, and
make it transparent so that the public could see who were vying
for BCA.

Special attention should be given to special purpose vehicle
companies, trusts and private capitals as they usually act on
their clients demands. The central bank should demand these
companies explain their ultimate beneficiaries.

If all the three institutions -- Bank Indonesia, IBRA and
Bapepam -- could work together hand in hand, they would be able
to shortlist the nine bidders and pick the most credible investor
for BCA.

Thus, they have to sit together to make a comprehensive
strategy in selecting the winner for BCA. And they have to do all
this before Jan. 28.

If such a comprehensive strategy is not in place before Jan.
28, the deadline for the bidders to submit their final bids must
be postponed to a later date.

If this postponement is not possible, the government must
require IBRA to work together with the central bank and spend
enough time to scrutinize the bids and announce the winner.
Otherwise, we will end up at square one, in which the same old
players will be running BCA and abusing public trust, again.

Nine bidders for BCA shares

1. Standard Chartered Bank Plc.,
2. Newbridge Capital,
3. Farallon Capital,
4. Bank Mega Consortium,
5. Dynamic Choice,
6. Indonesia Recovery Fund Limited,
7. Berca Consortium,
8. Consortium of Bank Panin shareholders led by PT Trimegah
Securities,
9. Consortium of three investors, including Indonesia's Setdco
Group.