Loan recovery strategy seen as IMF-tailored

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)