Only 4% of state banks' problem loans will be recovered: IBRA
Only 4% of state banks' problem loans will be recovered: IBRA
JAKARTA (JP): Only 4 percent of the Rp 267 trillion (US$38.1
billion) in problem loans taken over by the government from state
banks will eventually be recovered, the Indonesian Bank
Restructuring Agency (IBRA) predicted on Friday.
"This further confirms how unsound the lending practices at
state banks were," IBRA chairman Glenn M. Yusuf said at a
presentation of the agency's strategic plan for its asset
management for the 1999-2004 period.
Glenn said IBRA estimated that only 3 percent of the Rp 21
trillion in assets taken over from private banks nationalized
early this year would be recouped.
The IBRA report fixed the total value of assets it has thus
far taken over from closed, nationalized and recapitalized banks
at Rp 533.26 trillion.
IBRA was established in late January 1998 to administer the
government blanket guarantee on bank deposits and claims and to
restructure the banking industry, which was crippled by the
monetary crisis.
"But our projection shows that only 32.3 percent of this total
will eventually be recovered," Glenn said.
The projection assumes economic growth of between 4 percent
and 6 percent next year and between 6 percent and 7 percent in
five years' time. The National Development Planning Agency made
the projection.
IBRA estimated the total cost of the bank restructuring at Rp
643.3 trillion, which will be financed mostly by government
bonds.
"Since only about Rp 207.89 trillion of the total will
probably be recouped within the next five years, taxpayers will
have to bear a burden of Rp 435.5 trillion," he said.
In addition, the government, or taxpayers, will have to
shoulder about Rp 212 trillion in interest payments on the
treasury bonds issued to finance the bank restructuring program,
the IBRA report said.
Glenn said IBRA would endeavor to raise revenue through asset
sales minimally equivalent to the interest costs incurred by the
treasury bonds. The costs are estimated at Rp 50.8 trillion in
2000, Rp 42.8 trillion in 2001, Rp 42 trillion in 2002 and Rp
42.5 trillion in 2003.
Interest payments on government bonds for the current fiscal
year ending next March are estimated at Rp 34 trillion.
"Hopefully we will collect more than the interest costs, so
that we can gradually purchase treasury bonds from the market,
thereby decreasing the interest cost burden," Glenn said.
The report showed that 45 percent of the assets managed by
IBRA comprise manufacturing companies, 9 percent of hotels, 8
percent each of construction and trading companies, 4 percent
each of real estate and agro-based businesses and 14 percent of
non-bank finance companies.
Glenn called on the government to ease the restrictive rules
on foreign ownership of properties to enable IBRA to obtain high
value from its property assets.
"We own almost half of the buildings in the Kuningan area in
Jakarta which attract a lot of foreign investors," he said.
Kuningan is one of the city's prime development sites and the
location of many foreign embassies.
Replying to questions about IBRA's extrajudicial power in
acquiring, seizing and selling assets taken over from closed,
nationalized and recapitalized banks, Glenn said that his agency
needed the sweeping authority to execute its gargantuan task.
Government Regulation No. 17/1999, which provides sweeping
power to IBRA to cope with recalcitrant debtors, is currently
under judicial review by the Supreme Court following requests
made by hundreds of lawyers.
"If the court rules against IBRA, the whole bank restructuring
program will plunge into total chaos because everything that the
agency has done so far will be rendered legally null and void,"
Glenn said. (vin)