What a mess at IBRA
How very bleak the situation appears with the Indonesian Bank Restructuring Agency (IBRA), now seen as the most powerful economic organization in the country. Controversies, questionable deals and outright scandals have plagued the agency since its establishment almost four years ago.
Though every president after Soeharto, starting with B.J. Habibie, then Abdurrahman Wahid and now President Megawati Soekarnoputri, had always pronounced clean governance as the top objective of their administration, political meddling and collusion appear to be the hallmark of most deals IBRA has made either in asset sales or debt restructuring.
No wonder many now consider the agency to be a den of thieves, a tag previously applied to Bank Indonesia before it became politically independent in May 1999.
The latest and most blatant example is the highly controversial deal in December in which IBRA sold PT Indomobil Sukses International, the country's second largest automobile group that was ceded to the government in 1998 by the Salim family to settle part of its debts to the central bank.
As more information about the hurried deal-making process was leaked to the public, one cannot help but conclude that Indomobil's sale to a consortium led by PT Trimegah Securities violated all regulations and procedures laid out by the government and caused the state hundreds of millions of dollars in losses.
Consultant PricewaterhouseCoopers (PwC) had recommended that the tender process take about 21 weeks, given the size and complexity of Indomobil, its subsidiaries and its contracts with car principals overseas. But IBRA used recommendations by Deloitte, Touche & Tomatsu to speed up the process to a mere two steps -- final bid and due diligence -- that took just three weeks.
Obviously only insiders were willing to submit bids, as other interested bidders would have been disadvantaged by asymmetrical information to make a proper assessment of Indomobil within such a short period of time.
The result was predictably a fire sale, which was closed on Dec. 19 at only Rp 625 a share for a total transaction value of Rp 625 billion, way lower than the government's acquisition price of Rp 2,500/share in late 1998. Indomobil's value was assessed by PwC in 2000 at between Rp 1.6 trillion and Rp 2.1 trillion.
Analysts and most IBRA officials themselves consider the sale price disastrously low, especially now when the economic and political climate is much more stable than it was in 1998 and the automobile market outlook much brighter. Moreover, IBRA has always attached a 20 percent premium price to the sale of a majority ownership of an asset, but the Rp 625 closing price was still much lower than Indomobil's average share price of Rp 753.5 in November.
That Indomobil's creditors and car principals overseas raised no questions about the winning bidders, even though they were identified only as a consortium led by a securities company, only strengthens the suspicion that they are familiar with and have long been closely associated with the new owners. This gives further weight to allegations that the winning bidders are insiders.
Whistle-blowers at IBRA also revealed that the agency simply ignored a November recommendation from its Asset Management Investment division against a speedy sale of Indomobil. Yet in the most egregious violation of procedures, IBRA did not ask for prior consent from the Financial Sector Policy Committee of economics ministers, whose approval is only necessary for deals valued at Rp 1 trillion and more.
And why did it seem that State Minister of State Enterprises Laksamana Sukardi, who is in charge of supervising IBRA, simply sat back and nonchalantly observed how some IBRA officials bent almost all the standard, step-by-step procedures for the tender process?
The argument by some IBRA officials that approval from the ministerial committee is not needed for transactions worth less than Rp 1 trillion only strengthens the suspicion that the hurried sale process had been contrived simply to land a deal valued at less than Rp 1 trillion.
IBRA's reasoning that it was desperate to meet its target of revenue for the state budget contradicted a statement by IBRA chairman Putu Gede Ary Suta in November in which he claimed that his agency was close to achieving its revenue target for 2001.
It is most imperative for the government to audit the transaction and deal firmly with those responsible for the debacle, otherwise IBRA, which manages more than US$63 billion in state assets, and all major private and state banks will entirely lose the confidence of the public and the market.