Kadin urges foreign creditors to be forgiving
Kadin urges foreign creditors to be forgiving
JAKARTA (JP): Chairman of the Indonesian Chamber of Commerce
and Industry (Kadin) Aburizal Bakrie said on Saturday that
providing debt forgiveness to the country's indebted private
sector would be the best way to settle some US$64 billion in
overseas debts.
Aburizal said that a court settlement alternative would not
benefit both the foreign creditors and domestic debtors, as all
of the latter's assets would be far from enough to cover the
obligations.
"Without debt forgiveness, the local businessmen will not be
able to repay their debts," he told reporters, pointing out that
the sharp plunge in the value of the rupiah against the U.S.
dollar had tripled the value of the debt, but sharply cut the
value of the collateral.
He added that the debt forgiveness could include reduction in
the principal and interest rate, and extension of the maturity.
"It will be difficult for domestic businessmen to completely
repay their debts even in 100 years because they're selling
products in the domestic market, while their debts are in
dollars. So there must be debt forgiveness," he said.
The crisis-hit economy is expected to shrink by 15 percent
this year, 5 percent next year, and will take another five to
seven years before economic growth resumes to the pre-crisis
level - in an optimistic scenario.
Aburizal believes the country's new bankruptcy law, enacted in
August, won't be effective in solving the private sector overseas
debt puzzle.
"A court settlement will cause the debtors to lose their
assets, but the creditors won't be able to recover much of their
money either. So this is not a win-win solution," he said.
He urged the local businessmen to individually renegotiate
their debts with the foreign creditors and ask for forgiveness.
"Don't give up easily. I'm certain the domestic business
world still has bright prospects. The large population and
abundant natural resources are a guarantee of our economic
future," he said.
He added that the government had provided incentives and
eliminated regulatory obstacles to moving out of the court debt
restructuring agreement.
Under the so-called Jakarta Initiative program launched last
month, the government revised certain regulations including the
ruling on the revaluation of fixed assets, the tax ruling on
reduction of foreign debt, and the relaxation of merger criteria.
The Jakarta Initiative is meant to complement the debt
rescheduling scheme provided by the Indonesian Debt Restructuring
Agency (INDRA), in which the private sector overseas debt can be
extended over eight years as a result of a gentlemens agreement
in Frankfurt in June between the representatives of local debtors
and representatives of foreign creditors.
INDRA will guarantee the debtors with a lock-in exchange rate
which can be more favorable if the rupiah improves against the
dollar.
So far, none of the country's 2,000 indebted companies have
enrolled with INDRA, which opens for entries in one year,
starting early August.
Aburizal said that the eight year debt rescheduling agreed in
Frankfurt was still a huge burden for the country's debt ridden
companies, without debt reduction.
"But the Frankfurt agreement can be used as a benchmark for
debt settlement," he said, pointing out that each debtor and
creditor can use it as a framework for a case by case debt
settlement.
Aburizal also expressed concern about the Jakarta Initiative
as it doesn't guarantee an out of court debt settlement.
A commercial court to process bankruptcy requests by creditors
striving to liquidate debtors assets was launched in August and
has received eight petitions, in which three of the cases have
won court approval for a temporary suspension of debt payment and
another was denied.
The Jakarta Commercial Court last week dismissed the
bankruptcy request filed by the Singapore branch of American
Express Bank against publicly listed PT Ometraco Corporation,
because the bank's charge against the latter overlapped with
previous claims against the same company. (rei)