Mega to sign decree on SME this week

A'an Suryana, The Jakarta Post, Jakarta

President Megawati Soekarnoputri has endorsed the latest decree on the restructuring of debts owed by small and medium-sized enterprises (SMEs), and is set to sign it on Thursday, a senior government official says.

"The President agrees with the latest draft. The decree will take immediate effect once it has been signed," Taufik, a deputy at the Office of the State Minister of SMEs and Cooperatives, told participants at an SME seminar here on Tuesday.

He said that the latest draft of the presidential decree was the 25th version.

The government has been trying to come up with a restructuring plan for the debts owed by the SMEs for the past six months. Initially, the above ministry, with strong backing from Vice President Hamzah Haz, proposed a significant haircut facility and soft restructuring terms for the SMEs.

But this has been protested by banks who argue that such a policy could do further harm to their already shaky financial positions and would be unfair to other SMEs which have been good in repaying their debts.

These conflicting interests and intense lobbying by the banks has forced the government to revise the presidential decree many times.

The amount of debt owed by the SMEs totals around Rp 39 trillion (US$4.31 billion) including those owed to banks already taken over by the Indonesian Bank Restructuring Agency (IBRA).

Restructuring these debts is crucial to allow banks to resume lending to the SMEs.

The new version of the presidential decree does no longer specify the size of debt haircut facility for the SMEs. Under the previous versions, the haircut was set at 30-50 percent. Banks have protested such a facility.

Some analysts have said that the new version of the decree, reflects the triumphant of banks in lobbying the government particularly via the Office of the Coordinating Minister for the Economy.

"We hope that the debt problem could be resolved soon, so that the SMEs could start generating productive activities, in a bid to spur economic growth," said Taufik.