Supreme Audit Agency planning IBRA audit

Supreme Audit Agency planning IBRA audit

JAKARTA (JP): Head of the Supreme Audit Agency (BPK) Satrio B.
Joedono said on Monday the agency would audit the Indonesian Bank
Restructuring Agency (IBRA) in the "near future", following
strong demand from the public for transparency.

Joedono said the performance audit was also needed to ensure
IBRA was working as expected, particularly in restructuring the
ailing banking sector.

"We will check IBRA's books, examine its working mechanism,
how many people are employed and their salaries, etc.," he told
reporters on the sidelines of a seminar on the country's economic
prospects.

"We will do it (the audit) in the very near future. We will
report the results to the House of Representatives," he said.

But Joedono said that the audit might take quite some time,
explaining that IBRA was a big institution.

IBRA was formed by the government early last year to
rehabilitate the banking industry. The agency has now become an
economic giant, controlling Rp 250 trillion (about US$31 billion)
in non-performing loans of liquidated banks, state banks and some
other taken-over private national banks, $10.5 billion in
corporate fixed assets surrendered by former bank owners to repay
their debts to the government, and trillions of rupiah in non-
core bank assets.

The non-performing loans have been taken over from the closed-
down banks, nationalized banks or from banks joining the
government-sponsored bank recapitalization program.

The fixed assets were relinquished by former bank owners to
repay about Rp 143 trillion in liquidity support injected by Bank
Indonesia to the banks last year in the wake of a massive bank
run.

IBRA has been given four years to sell the assets to finance
the government's bank restructuring and recapitalization program.

IBRA's senior executives, including chairman Glenn S. Yusuf,
have toured five of the world's financial centers to gauge
foreign interest in the assets.

The government bank restructuring program has resulted in 52
banks being closed down but the shake up did not cause massive
panic as the government has guaranteed all depositors and
creditors of national banks until the end of this year.

The government bank recapitalization program is estimated to
cost up to Rp 500 trillion. The government plans to issue bonds
later this month to finance the program.

IBRA is expected to provide Rp 17 trillion from the sale of
assets to help finance the interest rate for the bonds issue for
the 1999/2000 fiscal year. The total interest cost for the year
is Rp 34 trillion.

With such a large amount of assets under its control, the
public has demanded that the agency be audited to ensure
transparency. Some experts have also demanded that IBRA be
transparent in its efforts to restructure or liquidate the non-
performing loans, particularly as the debts are mostly owed by
politically well-connected businessmen.

The audit by BPK may indicate the high level of concern over
IBRA's transparency, as the audit agency's main task is auditing
the state budget. A government institution or state company is
usually audited by the state comptroller agency (BPKP) but if
there is a serious problem, BPK also has the power to carry out
its own assessment.

Economist Sri Mulyani said it was essential to assure the
public of IBRA's credibility if the country wanted to take
advantage of the positive macroeconomic development in the first
quarter of this year.

"The credibility of IBRA as well as other agencies like the
Jakarta Initiative and INDRA is important to rebuild confidence,"
she said at the seminar.

The Jakarta Initiative task force was formed by the government
to help in the debt negotiation process between the country's
private sector and its overseas and domestic lenders.

But economist Anwar Nasution warned BPK not to get in the way
of IBRA in the audit process.

"If too many people ask too many questions of IBRA, it will no
longer have enough time to work," he said.

IBRA has had to spent a great deal of time dealing with former
bank employees who staged months of demonstrations demanding
higher severance payments. The agency also has had to spend time
in marathon meetings with the House of Representatives. (rei)