Kadin seeks big debt cut from foreign creditors

JAKARTA (JP): Foreign lenders are expected to grant an average 30 percent to 40 percent reduction in Indonesia's private sector debt, the Indonesian Chamber of Commerce and Industry (Kadin) said.

The chamber's chairman Aburizal Bakrie said lenders understood the difficulties faced by Indonesian corporations and had agreed to restructure terms of their loans, even granting reductions on the principal and interest payments.

"It's encouraging that the lenders have realized... that whenever a repayment problem arises, the two sides would take the burden, meaning that a 'haircut' is agreeable."

He explained that debt reduction and a deferral of payment would be included in a general framework sketched out by the government to solve the corporate debt burden.

Both creditors and debtors have agreed to such a plan, Aburizal said.

"We hope that over the next three months an agreement on debt reductions could be reached," he told media yesterday following a meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmista.

He added, however, that the size of the debt reduction would depend on the respective positions of each debtor and lender.

Creditors needing a quick injection of cash might agree to debt reduction of up to 50 percent, he said, but some could wait for a longer grace period and expect nearly full debt repayment.

"So I would advise debtors to negotiate with their lenders as soon as possible."

He added that there were still many creditors who had yet to fully examine their financial status.

Indonesian borrowers and their foreign creditors are scheduled to convene in New York this week to settle the country's corporate debt hangover.

The government announced in February that the private sector overseas debt exceeded US$68 billion.

As agreed upon with the International Monetary Fund, Indonesia will adopt a revised version of the Mexican "Ficorca plan", in which the government would provide the foreign exchange needed at a particular exchange rate.

Aburizal, who is also chairman of the diversified Bakrie Group, said he appreciated the government's involvement in the plan.

"It's a positive move," he said.

He stressed that a quick solution to the debt issue would require transparency on the part of borrowers.

"I fully support the government's demand for the borrowers to report their outstanding debts to the central bank," he said.

The nation's private sector overseas debt problem has been blamed for the severely weakened rupiah. The currency fell to its lowest level of Rp 17,000 to the U.S. dollar in January, compared to Rp 2,450 in the precrisis period in July last year. The rupiah settled at 7,500 yesterday, thanks to positive results from three weeks of negotiations between the IMF and the government.

The government has vowed to implement in full a revised version of the IMF-sponsored reform programs in exchange for the $43 billion bailout package organized by the fund. (rei)