Japan warns against delay in Chandra Asri deal

JAKARTA (JP): Japan warned Indonesia against a further delay in the restructuring of petrochemical firm PT Chandra Asri's debts, a move it said would erode investor confidence and deteriorate the value of the company's assets.

Hideaki Domichi, Minister at the Embassy of Japan in Indonesia, said that after two years of negotiations and a number of Memorandums of Understanding, investors of Chandra Asri were still waiting for a final resolution.

"If the resolution is delayed, everybody will lose, including Japanese investors and Indonesian investors," he told The Jakarta Post after the signing of World Bank loans to Indonesia worth US$448 million.

The Japanese government, he said, was closely monitoring the negotiation process for the restructuring of Chandra Asri's debts.

Japan had urged Indonesia many times to speed up debt negotiations for Chandra Asri, in which Japan's Marubeni Corp. has invested around US$733 million.

The country is a vital trading partner and donor country to Indonesia.

Various debt restructuring schemes for Chandra Asri were approved by the Financial Sector Policy Committee (FSPC), which groups several senior economic ministers.

FSPC is in charge of restructuring high-profile debts surrendered to the Indonesian Bank Restructuring Agency (IBRA).

Previous Chandra Asri debt deals ran aground mainly due to protests from IBRA alleging that the schemes were unfair.

Earlier, State Minister of State Enterprises Laksamana Sukardi said the government would review its debt restructuring deal for Chandra Asri.

The decision followed findings by an independent committee suggesting that the deal favored Japanese investors at the expense of the Indonesian government.

IBRA's oversight committee claimed the restructuring of Chandra Asri had ignored guidelines set by the FSPC.

Under the scheme, Marubeni would convert $100 million of its $733 million loans into 20 percent equity in Chandra Asri, while IBRA would convert $433 million of its $464 million into a 31 percent stake. The remaining 49 percent would still be held by the company's founder, Prajogo Pangestu.

"IBRA should have maintained a sustainable loan of $263 million as compared to $50 million under the FSPC scheme," the oversight committee said.

It added that chances of recovering the debts owed to IBRA would possibly be greater if Chandra Asri were to be liquidated or sold rather than maintained as a going concern.

Domichi declined to comment on the committee's review results, which he said were of a commercial nature.

But he added that all parties recognized the review results, the public announcement of which had been mandatory for receiving loans from the International Monetary Fund (IMF).

Drawing from Japan's experience with similar debt talks, Domichi said that "the longer you wait, the more you lose".

He said he saw similar cases in Japan's industries affected by a sluggish economy there.

Domichi warned that Chandra Asri's asset value would further drop while the government extended its talks with Marubeni.

According to him, the project is still viable and the loans invested in it are sustainable.

Indonesia, being an oil producing country, would benefit from developing Chandra Asri, as it was the country's only petrochemical facility, Domichi asserted.

Laksamana has said Indonesia would seek a combination of commercial and political approaches to resolve Chandra Asri's financial woes.

According to him, Chandra Asri is beyond rescue if only a commercial approach is taken.(bkm)