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.