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.