Salim Group debt 'won't be annuled'

Salim Group debt 'won't be annuled'

JAKARTA (JP): Coordinating Minister for Economy, Finance and
Industry Kwik Kian Gie said on Monday the government would not
cancel a debt settlement agreement signed between the Indonesian
Bank Restructuring Agency (IBRA) and the Salim Group.

But Kwik said the government planned to amend the clauses in
the master of settlement and acquisition agreement (MSAA) signed
with the business group to ensure that the principles of
fairness, accountability, maximum debt recovery and business
sustainability were upheld in the deal.

"The basic policy regarding the MSAA is not to annul it, but
to amend the clauses," Kwik told a media conference.

He said that the Financial Sector Policy Committee (FSPC)
would first consult with the House of Representatives (DPR)
before amending the MSAA.

The committee's senior economic ministers include the finance
minister, the minister of trade and industry, the state minister
of investments and the empowerment of state enterprises, the
chairman of the National Development Planning Agency (Bappenas)
and Kwik Kian Gee as the group's coordinator.

Kwik said the FSPC had asked government lawyers Kartini
Mulyadi and Fred Tumbuan to study the MSAA to seek ways to amend
its clauses.

Kwik made the statement in response to reports quoting him as
saying that the government was planning to annul the MSAA, which
was signed during the Habbibie administration.

Several of the country's conglomerates signed MSAAs with IBRA
last year to pay the debts belonging to banks they used to own to
the government.

Under the agreements, former bank owners have to surrender
their fixed assets, including company ownership, to IBRA to repay
their obligations.

The government injected massive liquidity support to bailout
the banks between 1998 and 1999 when confidence in the industry
was at its lowest.

The Salim Group, for example, surrendered its ownership in 109
companies to repay a total debt of Rp 51 trillion to the
government. The group used to own the now-nationalized Bank
Central Asia (BCA).

IBRA evaluated the value of a bank's assets, and if it deemed
them sufficient to cover its debts, the agency and the bank owner
signed an MSAA.

But under the agreements, former bank owners have no
obligation to surrender more assets if it turns out that after
being sold they are not sufficient to cover the debt.

Kwiw told the media recently that the committee was
considering annulling the MSAA because it was causing huge losses
to the state.

Kwik said at the time that the assets of the Salim Group were
only valued at Rp 20 trillion, far lower than its debts of Rp 51
trillion.

He said that under the MSAA, the remaining Rp 31 trillion of
debt had to be borne by the tax payers. "This is unfair and the
MSAA has to be dropped," he said.

Kwik's statement caused controversy, with businessmen and some
analysts saying that canceling the agreement unilaterally would
damage confidence in the government .(rei)