SME loan collateral liquidation to end

SME loan collateral liquidation to end

JAKARTA (JP): Three Indonesian business associations have
urged the government to stop liquidating collateral belonging to
small and medium-sized enterprises (SME) held by state banks.

The associations claimed on Saturday that Coordinating
Minister for Economy, Finance and Industry Ginandjar Kartasasmita
had instructed Minister of Finance Bambang Subianto to
discontinue the liquidations.

They added that the State Minister of the Empowerment of State
Enterprises Tanri Abeng also gave the same instruction to state
banks.

This was the conclusion of a Jan. 8 meeting between the two
ministers and the Indonesian Indigenous Businessmen's
Association, the Association of Young Businessmen, and the
Indonesian Small and Medium-Sized Businessmen's Association.

"The coordinating minister for economy, finance and industry
has instructed the finance minister to order the State Credit and
Auction Affairs Agency to stop the liquidation process of
collateral belonging to small and medium-sized businesses held by
state banks until a later date," said a release signed by Suryo
B. Sulisto, Hariyadi Sukamdani and Azwir D. Tara, who are
chairmen of the three associations.

The associations also expect Bank Indonesia Governor Sjahril
Sabirin to instruct private banks to stop liquidating collateral
belonging to SMEs as "a concrete step in taking sides with the
people's economy".

The associations did not specify which debtors were
categorized as the small and medium-sized enterprises that should
be granted the special treatment.

Nevertheless, such a measure may become another hurdle in
restructuring the country's beleaguered banking sector.

The banking industry is in the midst of a recapitalization
program to bring banks' capital adequacy ratio to a minimum of 4
percent.

The government has promised to provide up to 80 percent of the
recapitalization funding requirement, estimated to reach Rp 300
trillion (US$40 billion). The government expects part of the cost
to be financed through the sale of banks' nonperforming assets.

The government plans to provide the finance through the
issuance of bonds, the coupon rate of which for the 1999/2000
fiscal year would amount to Rp 34 trillion.

The new state budget is expected to cover Rp 18 trillion of
the coupon rate, while the remaining Rp 16 trillion is expected
to come from the sale of the banks' nonperforming assets.

The government, through the Indonesian Bank Restructuring
Agency's Asset Management Unit, will also take over all or part
of the nonperforming assets of the banks joining the government
bank recapitalization program to clean up their balance sheets.

The Asset Management Unit will repackage the nonperforming
assets and sell them to investors. (rei)