No restructuring facility for SME debts linked to huge groups
No restructuring facility for SME debts linked to huge groups
Adianto P. Simamora, The Jakarta Post, Jakarta
The government will not provide a restructuring facility for
small-scale debts owed by companies that are linked to large
business groups, according to the draft of a presidential decree
on the restructuring of debts owed by small and medium
enterprises (SMEs).
The draft decree, a copy of which has obtained by The Jakarta
Post, states that only SMEs with individual bad debts of equal to
or less than Rp 5 billion are eligible to avail of the
restructuring facility.
It further states that the restructuring facility is crucial
to helping revive SMEs and accelerating the country's economic
recovery.
There are at the present time outstanding debts worth Rp 39.6
trillion made up of individual bad debts of equal to or below Rp
5 billion owed to the Indonesian Bank Restructuring Agency
(IBRA), state-owned banks and the Directorate General of Debt
Recovery and State Auctions. A large chunk of the debts are owed
to IBRA.
IBRA took over the debts from closed or ailing banks. The
agency categorizes these debts as SME debts because of their
small individual size of equal to or less than Rp 5 billion.
When the government announced plans to launch a new
restructuring facility for this category of debt, many expressed
concern particularly as a large part of the debts were actually
owed by businesses linked to large business groups or consumer
finance loans owed by financially well-off people.
Under the new restructuring scheme that will replace the
existing scheme, which is due to expire next month, creditors are
to be banned for one year from seizing and auctioning the assets
of indebted SMEs so as to give the debt restructuring scheme a
chance to work first.
The restructuring plan also provides for a 100 percent cut in
interest and penalties. A 50 percent debt principal reduction
will also be available to SME debtors who repay their debts in
cash.
The government additionally plans to provide a 40 percent debt
principal reduction for debtors who can settle their debts within
a year.
For debtors who are unable to repay their debts, they will be
allowed a five-year debt rescheduling period, plus a two-year
grace period, and an interest rate of 9 percent.
If they still cannot pay their debts after this, the
government will auction off their assets, the draft regulation
states.
Economists said that debt restructuring for SMEs was important
for the country's economic development as they employed a huge
number of people and had been relatively unscathed by the 1998
economic crisis.