Legal action a must for bad debtors: Kwik

JAKARTA (JP): The government must start taking legal action against the country's recalcitrant debtors and former bank owners as one of the preconditions set to obtain the next loan disbursement from the International Monetary Fund (IMF), Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday.

He said other conditions included the necessity for the Indonesian Bank Restructuring Agency (IBRA) to start disposing its assets, announce plans to sell two banks and publish a trimonthly asset sale schedule for this year.

"(These) steps must be taken before signing the letter of intent (LoI)," he said in a statement issued after a Cabinet meeting.

Kwik said the government expected to sign a new letter of intent with the fund by the middle of July, paving the way for the next IMF loan disbursement of US$380 million in early August.

A letter of intent is a set of economic reform programs to be implemented by the government within a certain timeframe. The IMF will disburse its loan to Indonesia if its board of directors approves the letter of intent.

The IMF agreed in January to disburse some $5 billion to finance the country's three-year economic reform program. So far, the fund has disbursed more than $700 million.

Kwik also said the implementation of the letter of intent, signed with the fund last month, had made "significant progress" and the government was on track to meeting its June 30 deadline.

He said the economic team was expected to confirm the completion of the program with the IMF on July 5.

Kwik said taking legal action against the unruly debtors was crucial to maintain the credibility of the government's asset restructuring program as contained in the previous letter of intent.

Kwik did not provide any details.

IBRA currently controls about Rp 220 trillion of bad debts transferred from domestic banks.

The agency is also mandated to make sure that former bank owners, whose banks received massive liquidity support from the government, repay their obligations.

IBRA's strategic objective is to focus on restructuring 21 of its largest obligors. An obligor is a batch of debtors owned by a single business group.

IBRA has been strongly criticized for its slow progress in forcing the debtors to repay their obligations.

Minister of Finance Bambang Sudibyo recently warned the uncooperative debtors to repay debt or risk legal action, including imprisonment and seizure of assets.

"We will seize the assets of uncooperative debtors and prosecute the person or persons. This is our firm decision," Bambang said during a hearing with the House of Representatives Commission IX for financial and development planning affairs.

IBRA has also been criticized for its slowness in disposing its huge assets.

The agency controls about Rp 600 trillion worth of assets transferred from former bank owners and closed banks.

The agency is targeted to raise Rp 18.9 trillion this year to help finance the state budget, but so far it has only raised about Rp 2.8 trillion.

IBRA has said it plans to sell between 12 and 14 companies this year, and to divest its ownership in Bank Internasional Indonesia, Bank Universal, Bank Niaga and Bank Central Asia.

Kwik said on Tuesday that IBRA must immediately sell its assets, including implementing a fire sale approach if necessary, to be able to meet the Rp 18.9 trillion target in the remaining period of this year.

Elsewhere in the media statement, Kwik said the government has yet to reach agreements in several other areas.

He pointed out the plan to privatize the government majority ownership in state-owned enterprises (SOEs), except on certain strategic SOEs.(rei/byg)