Tue, 01 Aug 2000

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)