'Soeharto linked to Texmaco loans'

JAKARTA (JP): Minister of Investment and State Enterprises Development Laksamana Sukardi revealed on Monday that former president Soeharto was directly involved in the controversial Rp 9.6 trillion (US$1.35 billion) loans from state Bank BNI to textile conglomerate Texmaco Group.

Laksamana said the hefty loans to a single business group were made possible through the personal intervention of Soeharto.

"This is a case of national level collusion," Laksamana told the House of Representatives Commission IX for budget and banking.

He deplored that Texmaco got US$754 million plus Rp 1.9 trillion mostly in preshipment export facilities in stages between November 1997 and February 1998 from Bank Indonesia (the central bank) through Bank BNI at a time when the rupiah was under enormous pressure.

Texmaco, he added, used its Soeharto connection to twist central bank rulings to give it access to preshipment trade facilities from Bank Indonesia.

"This contravenes Bank Indonesia's own rulings that allows only post-shipment facilities.

"Worse still, Texmaco used the preshipment trade facilities to repay its foreign short-term debts," Laksamana added.

He regretted that at a time when the country's foreign exchange reserves were being eroded by pressure on the rupiah, Bank Indonesia gave large dollar loans to Texmaco.

"This is also in violation of the central bank-mandated legal lending limit by Bank BNI and the central bank ruling that requires prudent management of the country's forex reserves," Laksamana said

The country's legal lending limit at that time allowed a bank to lend to a single business group only as much as 20 percent of its capital.

The Bank Indonesia governor at that time was Soedradjad Djiwandono.

"There's indication that preshipment facilities were tailor- made to accommodate the needs of Texmaco," Laksamana said.

He also said that Texmaco continued to use its influence to prevent Bank BNI from transferring the company's loans, which had turned sour, to the Indonesian Bank Restructuring Agency (IBRA).

Under the government bank recapitalization program, nonperforming loans must be transferred to IBRA.

"I think the Texmaco loans must be transferred to IBRA in order for Bank BNI to become truly healthy," Laksamana said.

The controversy surrounding the Texmaco loans is the latest blow to the country's beleaguered banking sector following the outbreak of the high profile, politically charged Bank Bali scandal in late July.

Laksamana said he would soon reshuffle the management of publicly listed Bank BNI, including replacing its current president, Widigdo Sukarman.

Texmaco, a widely diversified group that produces textile machinery, synthetic yarn, fabric and garments, tractors, trucks and machine tools, is owned by Marimutu Sinivasan, a close friend of Soeharto.

Sinivasan admitted on Sunday that the company had huge loans from Bank BNI.

He said at a media conference that the loans were provided by the central bank through Bank BNI in the form of preshipment trade facilities.

"I thought at that time that there was nothing wrong with it because it was being offered to all companies. So Texmaco took the opportunity," Sinivasan said.

He also admitted that Texmaco used some of the BNI loans to repay short-term debts, arguing that "there was no other way for us to survive".

Sinivasan said that the plunge in the value of the rupiah against the U.S. dollar in 1998 had been the primary factor which prompted Bank BNI to exceed its legal lending limit in rupiah terms.

He pointed out that the rupiah plunged from Rp 2,500 per U.S. dollar before the crisis started in the middle of 1997 to more than Rp 10,000 last year.

Sinivasan also said that Texmaco was currently in the process of negotiating with BNI to restructure its loans, including through a debt-to-equity swap, which would allow BNI to own up to 40 percent of the textile giant.

Separately, Bank BNI said the Texmaco loans had not been transferred to IBRA because the loans were classified as category four loans, or doubtful loans, while loans that must be handed over to the agency were category five or bad loans.

There has been speculation that Texmaco prevented the loans from being transferred to IBRA to avoid tough debt restructuring procedures or possible litigation. (rei)