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)