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)