JITF to restructure $10b in foreign debts

JITF to restructure $10b in foreign debts

JAKARTA (JP): The Jakarta Initiative Task Force (JITF) is
striving to help private companies to restructure some US$10
billion in overseas debts this year, according to newly appointed
JITF chairman Laksamana Sukardi.

Laksamana said on Friday that the JITF, a private sector debt
restructuring body established by the government in early 1998 to
help break the impasse between debtors and creditors, would
provide regulatory incentives to encourage debtors to hammer out
a restructuring deal with their creditors.

"But the JITF only facilitates (debtors and creditors to reach
restructuring agreements), it's not providing a bail out (for the
debtors)," he told a press conference following a meeting with
senior government officials.

Laksamana is also the State Minister for Investment and the
Development of State Enterprises.

Laksamana said that the amount of the country's private sector
overseas borrowings totaled around $70 billion.

Most Indonesian companies simply stopped serving their foreign
debts after the value of the rupiah crashed against the U.S.
dollar in the middle of 1997.

Resolving this debt problem is seen as a key element toward
the resumption of badly needed foreign investment and foreign
trade financing and reviving confidence in the economy.

But only a few companies have reached restructuring agreements
with their foreign lenders and the slow progress in this area was
one of the main reasons behind the IMF decision to delay the next
disbursement of its loan to Indonesia.

Laksamana admitted that the pace of debt restructuring in the
country had been very slow due to various reasons, including the
lack of effective tools for the JITF to ensure a productive
mediation process between debtors and creditors.

But the government has begun to remedy this. Under a letter of
intent (LoI) agreed with the International Monetary Fund in
January, the government promised several measures, including: to
increase the institutional capacity of the JITF; to ensure
cooperation from related ministries and government agencies for
an accelerated regulatory approval of debt restructuring; and to
strengthen the bankruptcy court (Commercial Court).

Laksamana said that the government had already completed all
measures in the LoI which were related to the JITF.

Debtors and creditors joining the JITF are basically on a
voluntary basis. But in a bid to expedite the restructuring
process, debtors owing to the Indonesian Bank Restructuring
Agency (IBRA) could be transferred to the JITF by the Financial
Sector Policy Committee (FSPC) in cases where IBRA is a minority
creditor.

The government also promised in the LoI to issue a regulation
to allow the JITF to transfer restructuring cases to the Attorney
General's office for bankruptcy proceedings against debtors
failing to demonstrate good faith in the mediation process.

But debtors who display good faith to negotiate and repay
their foreign borrowings will be provided with regulatory
incentives, including tax incentive.

Laksamana said that tax incentives would be given to debtors
with promising earning capacity such as export companies and
strategic companies employing large numbers of people. (rei)