Legislators oppose govt's plan on BCA divestment

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)