Prijadi, IBRA accused of undermining debt deals

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)