RI's bankruptcy laws ready by August but no quick fix

RI's bankruptcy laws ready by August but no quick fix

SINGAPORE (Dow Jones): Indonesia plans to have bankruptcy laws
in place by August, but this and other measures are unlikely to
lead to a quick recovery for the embattled country, a state
minister told a business conference in Singapore yesterday.

"I would simply be pretending if I said that these measures
would result in a quick recovery," Tanri Abeng, Indonesian State
Minister for the Empowerment of State Enterprises told the Asia
Leadership Forum. "But even the best medicine doesn't work
overnight, and we should not hold overly big expectations for the
timing of our macroeconomic recovery."

Tanri said Indonesia intends to build the foundations for a
strong sustainable democracy, with a more transparent climate for
business as part of the restructuring of its economic and
political systems.

Tanri said among the country's top priorities in the short-
term is to fix its ailing banking industry and restructure the
corporate sector.

The country is working in cooperation with international
accounting firms to separate sound banks from weak ones. The weak
banks will either have to be closed, recapitalized or merged with
stronger banks, he said.

He also said the government plans to implement a new banking
law that will help establish a stronger banking system.

Two tasks must be completed as part of Indonesia's corporate
restructuring, he said. The private corporate sector must be
given a framework to restructure its foreign debt and the country
must implement new bankruptcy laws.

Efforts are underway to resolve the private debt issue, he
said, noting that a voluntary framework will be constructed
through the Indonesian Debt Restructuring Agency, which has been
agreed to by the country's major creditors.

"We realize that the voluntary framework for debt
restructuring will have little impact unless we are able to
modernize our bankruptcy system," Tanri said. "This will happen."

The government set up the Indonesian Bank Restructuring Agency
earlier this year as part of its agreement with the International
Monetary Fund to help restructure the beleaguered banking system.

It has since put 28 banks under supervision and has taken over
the management of seven other private banks. Meanwhile, a total
of 23 banks have closed down.

Turning to his own ministry, Tanri said the need to reform
state-owned enterprises has become much more urgent than before.

There are 160 state-owned businesses in Indonesia with about
1,000 subsidiaries, most of which are poorly managed, he said.

"Only 30 percent of our state-owned enterprises are rated as
financially healthy," Tanri said. "Returns on equity are
extremely low and most of their product and service offerings are
uncompetitive by world standards."

As a first step, the government will divest its stake in 12
state-owned companies during the current fiscal year, he said,
adding that these divestments are expected to bring in about US$2
billion. The proceeds will be used to finance the budget deficit,
he said.

The 12 companies on the for-sale list include five which are
listed on the Jakarta Stock Exchange. The government named
international investment banks earlier this month to manage the
sales.

Tanri said the longer-term plan is to liberalize and privatize
the rest of the state-owned enterprises.

The ministry is developing a master plan that will be
completed in October, he said. It will identify which state-owned
companies should be privatized, restructured or closed, he said.

Companies that will stay under government control will also be
made more efficient and competitive, either through financial
restructuring, changing management or modifying the regulatory
requirements, he said.