Legislators oppose govt's plan on BCA divestment

JAKARTA (JP): The government's plan to sell 51 percent of its shares in the publicly listed Bank Central Asia (BCA) could hit a snag as legislators from some big parties have expressed strong objections to the move.

Legislator Paskah Suzeta of the Golkar Party faction, the second largest in the House of Representatives, and Faisal Baasir of the United Development Party (PPP), the third biggest, told The Jakarta Post on Tuesday that their parties would oppose the planned divestment since no benefit accrued from it to the country.

"Our faction will reject the plan since the proceeds will not cover the cost the government paid for the bank's recapitalization program," Paskah said.

"Besides, from the investment point of view, there is no urgency whatsoever in selling the government stake in BCA now," he argued.

Faisal Baasir concurred and said: "After being recapitalized, BCA has developed into a healthy and profitable bank. Selling the stake at its current price level would yield no profit for the government."

Meanwhile, legislator Aberson Sihaholo of the Indonesian Democratic Party of Struggle (PDI Perjuangan), which is chaired by President Megawati Soekarnoputri, refused to comment on his party's stance over the divestment plan, saying that this was a matter for party leaders.

Lawmakers are paying special attention to the divestment of the government's stake in BCA partly because the government has issued bonds worth trillions of rupiah to finance the bank's recapitalization.

Last March, the government reached an agreement with the House to sell 40 percent of its 60 percent stake in BCA through a secondary public offering and private placement.

However, out of the blue the government, through the letter of intent it signed on Monday, has promised to the International Monetary Fund (IMF) that it will sell a 51 percent controlling stake in BCA through a private placement. This commitment was given without first consulting with lawmakers.

State Minister for State Enterprises Laksamana Sukardi expressed optimism on Tuesday that the House would eventually approve the divestment of 51 percent stake in BCA.

"The situation now has changed," he said when asked if he was worried the legislature might not give its approval for the divestment of a majority stake.

He also said the government wanted to ensure that BCA would remain healthy after being sold to a strategic investor.

"In selling a bank, the price is not the only thing that is important," said Laksamana, expressing fear that the government would be forced to bail out the bank again if the strategic partner had little experience in bank management.

"It's possible to sell the bank at a very high price, but what if the buyer is a crook without clear credentials. We may have to recapitalize the bank again."

"What we really need is a strategic partner who can maintain the bank in good shape over the long run," Laksamana said.

Market analyst Lin Che Wei praised the planned sale of a controlling stake in BCA as a "very good decision" from the perspective of attracting serious bidders.

With 51 percent of the bank up for grabs, possible strategic partners were seriously considering buying BCA shares because they would have full control over BCA.

"This is a good decision for the country's banking sector," he said when asked to comment on the planned divestment.

According to Lin Che Wei, Indonesia is facing a serious dilemma.

"On the one hand we don't want our banking assets to be controlled by foreign investors, but on the other hand, if the stakes are sold to local businessmen at heavily discounted prices, the banks might end up back in the hands of the owners who proved themselves incapable of running them in the first place," he said.

The IMF, Lin said, wanted healthy banks to be privatized because "there are fears that if the banks are not privatized, the government will use them to bail out other banks which would only create a moral hazard for the other banks," he said.

Lin, nevertheless, warned that the government must protect the interests of foreign investors in the country.

"The government has to ensure that once foreign investors come in, they won't be interfered with," he said. (03/bkm)