RI 'lacks experts for new bankruptcy law'

RI 'lacks experts for new bankruptcy law'

JAKARTA (JP): Indonesia's new bankruptcy law may face
difficulties during its first year as the result of a lack of
lawyers and accountants qualified to act as receivers and
administrators, according to the chairman of a receivers'
association.

"I admit the lack of expert personnel may pose a problem
during the first year," said Timur Sukirno, who was installed as
the chairman of the newly-established Indonesian Receivers and
Administrators Association yesterday.

He said the privately-run association had only 16 qualified
receivers and administrators in addition to those employed by the
state-owned Receivers House (BHP).

Experts have said the quality of BHP receivers and
administrators is far from sufficient to handle modern bankruptcy
proceedings.

The Commercial Court, set up recently to enforce the
bankruptcy law, is slated to start operations on Aug. 20.

"We anticipate that a mounting number of bankruptcies and
suspension-of-payment petitions will be filed at the commercial
court so we intend to conduct training programs to ensure we have
an adequate number of receivers and administrators," said Timur.

He added that a training class sponsored by the International
Monetary Fund (IMF) and the Asian Development Bank (ADB) would
open on Aug. 10 for around 40 lawyers and accountants.

He explained that the task of a court-appointed receiver was
to manage the assets of debtors declared bankrupt by the
commercial court and to ensure that funds raised from the sale of
these assets were distributed equally among unsecured creditors.

The administrator assists directors of the debt-ridden company
to manage their assets and restructure their debts in a debt
payment suspension case, he added.

The Ministry of Justice director general of law, Erman
Rajagukguk, admitted that Indonesia has a very limited number of
qualified receivers and administrators compared to more than
6,000 in Australia who process an average of 35,000 bankruptcy
petitions every year.

"We will have to train more lawyers and accountants. But in
the meantime the existing ones will just have to work much
harder," he said yesterday after inaugurating the receivers and
administrators association.

He also conceded that BHP staff were poorly qualified and
lacked specializations in the receivership and administrative
work.

The new bankruptcy law, approved by the House of
Representatives last month, will replace the current law which
was introduced in 1906 by the Dutch colonial authorities. It will
take effect on Aug. 20 and will provide a clear timetable within
which the court must rule on bankruptcy proceedings.

Under the new law, commercial courts must complete bankruptcy
cases within 30 days of when they were filed. A further 30 days
is then allowed for an appeal process.

This is a significant improvement on the old regulations,
which allowed debtors to delay cases almost indefinitely.

Erman said that 25 commercial courts would start processing
bankruptcy and debt moratorium petitions on August 20.

Hundreds of companies are now technically bankrupt as a result
of the sharp depreciation of the rupiah against the U.S. dollar
which has caused the value of unhedged foreign debts to soar in
local currency terms.

The new ruling is also expected to improve confidence in the
country's crisis-hit economy by providing creditors and investors
with effective legal protection in the event of their investment
turning sour.

However, the implementation of the new bankruptcy law should
not be seen as doomsday by troubled debtors, said Fred Tumbuan, a
founder of the receivers and administrators association.

"A bankruptcy declaration does not mean that the day of
reckoning has arrived," he said.

He pointed out that the new law also provided an ailing but
potentially viable company with legal protection so that it could
restructure its debts.

The law stipulates that a debtor, with the help of an
administrator, has the right to ask the court for 270 days to
restructure its debts, including through negotiations to write
off debt with its creditors.

Analysts have said that most local companies will be in no
position to pay their dues after a year of the economic crisis
which has seen the value of the rupiah drop more than 80 percent
against the U.S. dollar.

The Indonesian private sector holds enormous overseas debts
which it is unable to repay. Companies have been forced to go
cap-in-hand to their foreign creditors to ask for huge debt
discounts to allow them to resume payments and business
operations.

The success of the Indonesian Debt Restructuring Agency
(INDRA), which started operation on Monday, also partly hinges on
the willingness of foreign creditors to write off large amounts
of debt in addition to the eight year debt restructuring program
which they have already agreed to. (rei)