Prijadi, IBRA accused of undermining debt deals

JAKARTA (JP): The finance ministry under Prijadi Praptosuhardjo and the Indonesian Bank Restructuring Agency (IBRA) have been accused of undermining corporate debt restructuring deals approved by the Financial Sector Policy Committee (FSPC).

FSPC secretary Syafruddin Tumenggung told a seminar on Wednesday that Prijadi and IBRA had refused to implement around 140 decisions made by the FSPC, which until June 12 was chaired by then coordinating minister for the economy Rizal Ramli.

"I have to reveal this so that the public knows what is really the problem," he said.

"I don't understand why Prijadi and IBRA acted this way, they never mentioned their reasons," Syafruddin added.

But Syafruddin denied the suggestion that Prijadi was dismissed from the Cabinet last week, and replaced by Rizal, partly due to the mounting disagreement between the two over major corporate debt restructuring schemes.

"With the appointment of Rizal Ramli as the new finance minister, I'm optimistic that IBRA and state banks will implement FSPC's decisions," he said.

IBRA, state banks and all other state companies are under the jurisdiction of the finance ministry.

It is not clear, however, whether Rizal, whose supervision IBRA is now directly under, will replace IBRA chairman Edwin Gerungan.

Syafruddin made the disclosure after one participant at the seminar complained that the debt restructuring program for small and medium-sized enterprises (SMEs) approved by the FSPC in January did not work.

The FSPC has ruled that indebted SMEs could get a 25 percent discount on debt principal and a waiver on interest within the restructuring of their debts to IBRA.

Syafruddin confirmed that the decision on the debt reduction for SMEs was one of 140 debt restructuring measures already decided upon by the FSCP which remained unimplemented by the finance minister and IBRA.

Prominent economist Sri Mulyani said at the seminar that many FSPC decisions did not work partly because of disagreement between Prijadi and Rizal.

The FSPC, which groups several senior economics ministers including the finance minister, has the final say on the country's major corporate debt restructuring program.

Initially, the FSPC only approved the restructuring of corporate debts with an individual loan size of more than Rp 1 trillion, but under Rizal it turned out that the committee also interfered in the restructuring of smaller debts such as those owed by SMEs with individual debts of less than Rp 5 billion.

IBRA took over around Rp 280 trillion worth of bad debts from the country's ailing banking sector in the aftermath of the 1997 financial crisis. The agency is mandated to restructure the bad debts.

But since IBRA is a unit of the finance ministry, the agency cannot not implement FSPC decisions without prior endorsement by the finance minister.

One of the most high-profile cases involved the restructuring of about US$730 million owed by petrochemical giant PT Chandra Asri to Japan's Marubeni Corp., which was approved by the FSPC in April, but could not be implemented after both IBRA and Prijadi rejected the deal.

IBRA had demanded Marubeni convert a greater portion of its loan into equity in Chandra Asri. The agency is currently renegotiating a new debt workout for Chandra Asri with Marubeni.

Meanwhile, IBRA declined to comment on Syafruddin's statement.

"I can't comment because I did not hear the accusation directly," said a senior official of the agency.

"But this is not an important issue, it's only a matter of bureaucratic red tape," he added.

The FSPC had been criticized for being too deeply involved in the work of IBRA. Legislators had demanded the committee be dissolved and ordered an independent oversight committee of IBRA to review FSPC decisions.

Chairman of the oversight committee Mar'ie Muhammad, a former finance minister, recently told the House of Representatives Commission IX for the state budget and finance that the committee had found significant defects in four corporate debt restructuring memorandums of understanding (MOUs) approved by the FSPC.

The FSPC has submitted at least 32 MOUs to the oversight committee for review, but the committee has only started assessing four. (rei)