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)