Lippo's Riady backs govt action on troubled banks

Lippo's Riady backs govt action on troubled banks

JAKARTA (JP): Deputy chairman of the Lippo group James T.
Riady hailed yesterday the government's move to freeze and
nationalize several debt-ridden banks, believing it would help
restore market confidence in the country's ailing banking
industry.

James, who is also the government's special business envoy to
China, Hong Kong, Taiwan, Australia and New Zealand, said
domestic and international markets welcomed the action.

But he noted the government was still expected to follow up
the measure by seeking accountability of the bank owners.

"The international and domestic markets must clearly see that,
in the eyes of the government and the law, all are the same. If
you do something wrong, the government will act upon it," James
said on the sidelines of a business luncheon held by the
Indonesian-Australian Business Council.

The government announced Friday various measures to clean up
the chaotic banking sector, including to immediately freeze the
operations of Bank Dagang Nasional Indonesia, Bank Umum Nasional
and Modern Bank. It will also nationalize the giant Bank Central
Asia (BCA) and Bank Danamon, and possibly Bank Tiara and Bank
PDFCI.

The seven banks were earlier taken over by the Indonesian Bank
Restructuring Agency (IBRA) after they received massive liquidity
support from Bank Indonesia, amounting to more than 500 percent
of their capital, to maintain operations.

Fifty-five of about 200 domestic banks are under the authority
of IBRA.

Minister of Finance Bambang Subianto gave a Sept. 21 deadline
to owners of BCA and Danamon for them to pay back the funds as a
prerequisite for them to recoup command of their banks.

BCA is co-owned by the families of former president Soeharto
and his longtime associate Liem Sioe Liong. Danamon is controlled
by Usman Admadjaja's family.

Subianto earlier said the government would not control the
nationalized banks, but restructure them before selling them to
investors through private placements or the stock market.

Reject

James contended the government should deny the owners of the
nationalized banks the chance to regain the institutions since
their presence would do nothing to rebuild market confidence in
the banking sector.

"The public's confidence will not be restored if the banks are
returned to the former owners."

James, who is also a commissioner of the publicly listed Lippo
Bank, argued that dozens of the country's banks remained healthy
and liquid despite the more than a year-long monetary crisis.

The government should give the banks the chance to strengthen
themselves amid the crisis to anticipate future competition with
foreign banks in the country's increasingly transparent and
liberalized market, he added

He predicted that the crisis, whose effects began to be felt
in August last year, would bottom out in two years or three years
and the country's economic recovery would start in four or five
years.

Indonesia needed consideration from developed countries like
the United States and Australia to regain its economic growth, he
said at the luncheon chaired by former Indonesian ambassador to
Australia and council president Sabam Siagian.

He said many sectors were still promising for Australian
businesspeople amid the crisis, including natural resource-based
industry, the financial service industry, agricultural sector and
education sector.

"Indonesia's prospects are still bright in the middle and long
term."

Also yesterday, the Legal Aid Foundation urged the government
to follow regulations in compensating employees of the liquidated
banks.

Bank Dagang Nasional Indonesia, Bank Umum Nasional and Bank
Modern reportedly have 15,000 workers nationwide.

Some will continue to be employed for administrative work
until October.

Head of the foundation's workers division, Teten Masduki, said
the amount of severance pay should be determined through
discussions between the banks' management and workers under
mediation of the Ministry of Manpower. (jsk)