JITF ends mandate, completes most tasks

Dadan Wijaksana, The Jakarta Post, Jakarta

The government, without much fanfare, dissolved on Thursday the Jakarta Initiative Task Force (JITF) after it completed a fairly successful five-year mandate of restructuring most of the private sector's huge debts as it had been asked to do.

Having handed over a total of 102 cases worth of US$26.9 billion in debts, JITF managed to restructure 96 cases worth $20.5 billion, or close to 80 percent of the total value, JITF Chairman Bacelius Ruru told reporters.

"Most of the debts were dealt with in the form of rescheduling. But there are other ways, which are also popular: debt-to-equity swaps, debt-to-asset swaps and buybacks," Bacelius said.

While rescheduling extends the date of maturity, a buyback scheme allows debtors to purchase back their debts at discounted prices.

JITF was a state-funded agency which, similar to the Indonesian Bank Restructuring Agency (IBRA), was tasked to help clean up the mess resulting from the financial crisis in late 1990s, as many loans had turned bad following the rupiah's massive depreciation.

While JITF is focused on tackling debts owed by the private sector, IBRA was assigned to tackle bad loans from the banking sector that have become non-performing.

Upon the request of the International Monetary Fund (IMF), the World Bank and the United States Agency for International Development (USAID), the agency was established in 1998 with its main task being to restructure huge dollar-denominated debts owed by the private sectors to creditors, mostly foreign banks. A successful debt restructuring would allow companies to seek new loans to strengthen their capital, or to use as working capital.

Although there are many companies that had sought to settle their debts with creditors by themselves, hundreds of companies turned to the JITF for help.

At the start of the crisis, Indonesia's companies owed an estimate of $120 billion to both domestic and foreign creditors, of which $60 billion was said to be in a "distressed condition".

The agency was initially set to close in 2002, but its mandate was extended by the government for another year because there were still a lot of debts in the corporate sector yet to be restructured. Furthermore, the agency had been performing efficiently.

Coordinating Minister for Economic Affairs Dorodjatun Kuntjoro-Jakti hailed the closure of the agency, saying it should show signs that the country's economic recovery was on the right track.

"I'm pleased about this, especially as we're also about to witness the closure of IBRA which is also an agency inherited from the crisis," Dorodjatun said.

IBRA is slated for termination by the end of February.

With the JITF mandate having expired, many of its members have now joined the National Mediation Center, a newly established agency with the purpose of facilitating and mediating commercial disputes between debtors and creditors, he added.

JITF, supervised by the Financial Sector Policy Committee -- a powerful grouping which consists of senior economic ministers -- was staffed by a multinational team of local and expatriate professionals and support staff.

Samuel Tobing, JITF Chief Operating Officer, said that most Indonesian corporations have successfully lessened their debts by as much as 50 percent, making them well capitalized to meet the next phase of economic expansion.