RI debtors 'reluctant to pay their debts': IMF official

RI debtors 'reluctant to pay their debts': IMF official

By Kornelius Purba

TOKYO (JP): There is strong corporate culture in Indonesia of
refusing to honor commitments. This is shown by the reluctance of
the Indonesian debtors to repay their domestic and offshore
debts, according a veteran International Monetary Fund (IMF)
official said over the weekend.

Kunio Saito, IMF director at the regional office for Asia and
the Pacific in Tokyo, pointed out that many of the owners of the
private sector enterprises that are currently under the control
of the Indonesian Bank Restructuring Agency (IBRA), intentionally
refused to repay their borrowings although many of them were
actually capable of fulfilling their obligations.

Many of the debtors just use time-buying tactics in the hope
that they can escape from their debts by prolonging the
negotiating process until their creditors simply give up.

"To the extent that there are so many businessmen who do not
want to pay, I think I can call it a culture," Saito said in an
interview with The Jakarta Post at the IMF office in Uchisaiwai,
the Tokyo financial district.

Saito described the corporate and banking restructuring
programs as the most difficult parts of the Indonesian economic
reform plan and implied that there had still not been major
progress achieved in these two sectors over the last three years
despite the regular issuing of Letters of Intent by the
government and the IMF.

The senior economist, however, refused to identify the private
companies. "Specific names I don't know. Even if you ask me I can
not answer because I don't know," he said with a big smile.

Saito joined the IMF in the 1960s as a junior economist. He
was a member of an IMF team in Jakarta from 1969 to 1971, when
Soeharto had just replaced first president Sukarno and began his
ambitious plan to rebuild the country's collapsing economy. He
recalled how the IMF team worked closely with Soeharto's economic
architects Wijoyo Nitisastro and Ali Wardhana.

"Young president Soeharto and young Wijoyo and young Ali
Wardhana were the team which got the economy through," Saito
recalled.

Saito since then has been following the process of formulating
and implementing the policies of the Indonesian government under
the IMF framework including when Indonesia was hit by the
economic crisis shortly after Thailand was assailed in July 1997.

"Working in Thailand during the early crisis was probably the
most memorable experience for me," he recalled.

With regard to Indonesia again, Saito said many of the
Indonesian businessmen were able to maintain their strong moral
hazard tendency due to the country's weak judicial system,
complicated bankruptcy procedures and ineffective government
supervision.

Compared to the private sector in Thailand and South Korea,
which were also severely hit by the economic crisis in 1997,
Indonesian private companies were the worst in terms of goodwill
in settling their obligations. Businessmen in the other two
countries were more cooperative in settling their debts.

Saito, however, also acknowledged that Indonesia was slower in
implementing the corporate debt and bank restructuring programs,
because its problems were also much bigger than the problems
faced by private companies in Thailand and South Korea, and even
in Japan in terms of the number of problematic companies and the
size of their debts.

"The number of corporations that failed is much bigger, and
the extent of the bad debts or the degree of the debt burden is
much more severe in Indonesia, unfortunately," Saito remarked.

He could not hide his disappointment with the progress
achieved by the current government in the corporate restructuring
of private sector debts, especially in setting up a strong legal
framework against the bad debtors, despite the government's
recent measure to increase the number of judges to handle such
matters.

Saito, however, also expressed his respect for the new
Indonesian economic team, led by the Coordinating Minister for
the Economy Rizal Ramli. "He made us work harder," he remarked.

The economist conceded that Indonesia should not shoulder the
blame alone. The international community, including the IMF,
international institutions and money lenders, described the Asian
economy, including Indonesia, several years ago as a world
miracle and that the 21st century would belong to Asia.

Money and working capital were then carelessly disbursed to
the region, as the foreign investors and creditors were trapped
by their own greed for profits, he noted.

"We all believed in the Asian miracle at that time," said
Saito and burst out laughing.