Loan recovery strategy seen as IMF-tailored

JAKARTA (JP): The new strategy for recovering non-performing loans (NPLs) of the country's major banks, announced by the government on Friday, reflects strong pressure from the International Monetary Fund to accelerate the debt resolution process, according to analysts.

Pande Raja Silalahi, an economist at the Center for Strategic and International Studies (CSIS), said on Saturday the IMF- tailored broad strategy would ensure greater recovery of the bad loans mostly owed by well-connected businessmen.

"It (the effort) is now well-organized and well-planned," he told The Jakarta Post.

Pande said that maximum recovery of NPLs was important to help finance the country's costly bank recapitalization program.

The loan recovery strategy is outlined in a revised letter of intent to the IMF. The Fund's board of directors will convene at the end of this month to decide on the next disbursement of IMF bailout money for Indonesia, which expects to receive US$1 billion in June together with the release of the $500 million Japanese Miyazawa aid.

"The government has instructed state banks, taken-over banks, and the Indonesian Bank Restructuring Agency (IBRA) to accelerate their restructuring efforts and maximize expected asset recovery values," the letter said.

IBRA is expected to assume over Rp 220 trillion in NPLs from the country's seven state banks (Rp 100 trillion), 12 private banks (Rp 120 trillion) taken over by the government, eight recapitalized private banks and 38 banks closed down in March.

The government said the loan recovery strategy would be initially focused on the 20 largest debtors at each bank. The strategy will include debt restructuring options and bankruptcy filings.

It added that the groups would be classified according to their financial prospects and level of cooperation, and monthly recovery targets would be set for each bank and IBRA.

The names of non-cooperative borrowing groups would be published this month, it added.

The government set August 30 as the new deadline to decide whether to restructure the borrowing groups or take legal action, including the filing of bankruptcy suits, against them.

"These steps are being monitored closely through regular meetings of IBRA and IMF, World Bank and Asian Development Bank representatives," the letter said.

Many had earlier doubted whether the government could settle the NPLs owed by the largest debtors who are politically connected, many of them family or associates of former president Soeharto.

Umar Juoro, an economist at the Center for Information and Development Studies (CIDES), urged the government not to swap the NPLs with equity in companies with negative cash flow.

He specifically pointed out the debt-ridden PT Chandra Asri Petrochemical Center, which he said should be sold to its Japanese investors rather than partly taken over by the government.

Chandra Asri is a joint venture between Soeharto's son and cronies and Japanese investors, including Marubeni Corporation. (rei)