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)