Team to finalize IBRA debt extension plan

Team to finalize IBRA debt extension plan

Berni K. Moestafa, The Jakarta Post, Jakarta

A small government team will finalize talks over a controversial
plan to grant debt payment extensions for large debtors of the
Indonesian Bank Restructuring Agency (IBRA), while also reviewing
the problems plaguing other IBRA debtors.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said President Megawati Soekarnoputri and Vice President
Hamzah Haz had agreed on the formation of the team during a
Cabinet meeting on Friday.

"This small team will have to review everything, not just the
large debtors but also the small ones, the loans for farmers up
to the BLBI issue," he said, referring to the Rp 144.5 trillion
(about US$13.9 billion) in liquidity support loans (BLBI), of
which nearly all are believed to have been misused.

Dorodjatun said the team would be comprised of inter-
ministerial officials and was expected to wrap up its work by mid
February.

Any conclusions from the team will still be subject to
consultation with legislators and approval from the Cabinet, he
added.

On the debt extension plan, Dorodjatun said he hoped the team
would come up with a solution to the countless futile legal
actions against uncooperative debtors.

"We will need the cooperation of the Coordinating Ministry for
Security, the Attorney General's Office and the National Police
Chief," he explained.

The controversy over the debt extension plan centers on the
government offering uncooperative debtors incentives rather than
punishment.

People's Consultative Assembly Speaker Amien Rais criticized
the government for its insensitive decision,detik.com reported on
Friday.

While the public has been burdened again by the raise in fuel
prices, the government continues to give debtors leeway to escape
payment, Amien said.

Under a new shareholders settlement program, IBRA extended the
debt payment period for its debtors to 10 years from four.

It has also effectively lowered the interest rates that
debtors must pay, by decoupling them from Bank Indonesia's three
month promissory notes, now at some 17 percent.

Under the new program, debtors must pay a minimum interest
rate of only nine percent.

The shareholder settlement program applies to former bankers,
whose banks the government bailed out from the impact of the 1997
financial crisis.

But a report by the Supreme Audit Agency revealed abuses
amounting Rp 138.4 trillion in the use of the bail out funds
under the BLBI scheme.

This should have led to the prosecution of the banks' owners,
yet the government opted instead for an out of court settlement.

The shareholders settlement program is an umbrella agreement
on which are based various debt settlement schemes.

In 1998, five conglomerates agreed to enter the program under
one scheme known as the Master of Settlement and Acquisition
Agreement (MSAA).

For Bank Dagang Negara Indonesia (BDNI) owner turned MSAA
debtor, Sjamsul Nursalim, the deadline for his debt settlement is
this year.

He owes the state some Rp 28.4 trillion, but a long deadlock
over talks on the term of payment have been stalling the payment
process to this point.

"After 3.5 years without a settlement, the question we must
ask ourselves, is that of law enforcement," Dorodjatun said.

He said since the shareholder settlement program was using an
out of court approach, uncooperative debtors should be brought to
court.

But some experts said that past deals like the MSAA were so
weak that even if IBRA had a strong case against its debtors, the
latter could still claim victory in court.

IBRA chairman I Putu Gede Ary Suta said there were currently
2,400 legal cases against the uncooperative debtors in process.

"The court has issued verdicts on 230 cases; we lost nearly
all of them," Ary Suta lamented.

According to the experts, IBRA's position is made worse by the
fact that bribery is a common practice at court -- a situation
that is often behind the many controversial decisions the
Indonesian courts are known for.

"This (IBRA's weak legal power) is everybody's problem,"
Dorodjatun said.

He has earlier promised tougher legal actions against the
uncooperative debtors to accompany the incentives they had
received from the revised shareholder settlement program.

Major debtors

(Shareholders -- Bank name -- Amount of debt (in trillion rupiah)):
Soedono Salim -- BCA -- 52.73;
Usman Admadjaja -- Danamon -- 12.53;
Sjamsul Nursalim -- BDNI -- 28.41;
Kaharuddin Ongko -- BUN -- 8.35;
Mohammad Hasan -- BUN -- 5.34;
Samadikun Hartono -- Modern -- 2.66;
Hokiarto & Hokianto -- Hokindo -- 0.29.