Restructuring or bailout?

When the government approved a plan of the Indonesian Bank Restructuring Agency (IBRA) to restructure the debts of a number of big private corporations, objections were immediately raised by observers and others who maintained that the plan amounted to a bailout and that, therefore, it caused the state to lose money.

A debate ensued after the Financial Sector Policy Committee gave its approval to a plan to settle the problem of a number of big debtors such as the Texmaco Group and Tirtamas Majutama Group, whose aggregate outstanding debts amount to several trillions of rupiah. The government had earlier bailed out Chandra Asri, whose debts amount to some US$700 million...

The debate about whether the plan is or isn't a bailout could last for a long time and consume a good deal of energy with each side sticking to its own strong argument. In trying to settle the problem of bad debts, however, the priority should go to any plans involving the least possible risk to the state. Any measure that simply puts the conglomerates' debt burden on the shoulders of the state must be averted. Giving the impression that the government is a lender of last resort must also be avoided.

-- Bisnis Indonesia, Jakarta