What a mess at IBRA
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.