Indonesia fears Salim will win BCA


Selling off BCA was one of the Megawati administration's main reform pledges, after she was sworn in last July

By Yenni Kwok

JAKARTA, Indonesia (CNN) -- Indonesia is again dallying over selling its majority stake in its biggest commercial bank.

Now the government is trying to reassure the public that the bank's old owner will not regain control.

There are concerns that the Salim Group will win back the Bank of Central Asia.

State Enterprises Minister Laksamana Sukardi said this week he would resign if the Salim Group won the bank back. But he did little to quash those concerns.

Taken over after debt collapse

The government took over BCA, and bailed out many Salim companies, after the group sank under huge debts in the Asia financial crisis.

Sukardi on Tuesday reiterated that the government would not allow the group to regain control of BCA.

The government missed a deadline to privatize at least 50 percent of BCA by the end of 2001. It has repeatedly stalled over selling most of its 60 percent take.

But Sukardi says he is still pushing ahead with what the International Monetary Fund sees as a vital reform.

He now says he will resign if IBRA, or the Indonesian Bank Restructuring Agency, sells the bank to a company affiliated to the old owner.

"This is my responsibility," he said.

Sukardi: Anthony Salim won't bid

Sukardi's ministry oversees IBRA, the country's reform agency. IBRA is also managing the sale of the BCA sales, which involves 51 percent of the shares.

Sukardi also said he had called Anthony Salim, president and CEO of Salim Group, telling him not to join the bidding.

Anthony Salim, the son of the conglomerate's founding tycoon Sudono Salim, has given his word that he will not try to buy back the shares of BCA, Sukardi claims.

Despite those assuring words, Sukardi admitted that he could not prevent the former owner to buy back BCA shares one way or another.

"Who can guarantee that they would not buy BCA shares through the secondary market, or use a joint-company in Hong Kong and buy the shares through stock market? I won't know anything," he said.

Patriarch Sudono Salim was a close crony of former president Suharto.

Under the Salim conglomerate, BCA grew into Indonesia's largest private bank, with branches and ATMs in across the country.

But after Suharto fell from power and the Asian financial crisis developed, the bank suffered grave financial difficulties.

Finally, the government bailed it out at great cost.

Authorities say BCA had breached lending-limit regulations, by channeling most of its money to the other subsidiaries of Salim Group.

The government had to inject massive liquidity support into the bank during the crisis.

According to economist Faisal Basri, with such poor track record, the Salim Group should not be allowed to own BCA again. "

Salim Group did something awful, and it was not appropriate if they control the shares again," he said.

A litmus test

Still, rumors abound that the Salim group has been using proxy companies to buy back its former assets, such as carmaker Indomobil and television broadcasting company Indosiar.

BCA was the star jewel of the conglomerate.

Exactly who is behind the companies that bought Indosiar and Indomobil -- PT TDM and PT Trimegah Securities, respectively -- remains unclear to the media and the business community.

Indonesia has agreed to sell off 51 percent of BCA by the end of 2001, in its last letter of intent with the IMF. But it has delayed the sale again.

BCA's sale has now been delayed three times, partly due to political interference.

Last time around, two serious bidders emerged. But IBRA called off the final bidding process, citing low offers

It was rumored that one of the final bidders was acting on behalf of Salim.

"The sale is the litmus test that the government has to carry out," economist Arif Aryman said. "In the eye of investors, this is a test on Indonesia's credibility, whether there will be an improvement in the banking sector and the capital sector."

There are now nine bidders for the BCA stake, including Malaysia's Plantation Group, the British bank Standard Chartered Bank, U.S. venture capitalists Newbridge Capital and the Indonesian Recovery Fund.

They have until January 28 to submit their final bids.

Observers have called for the sale to be even more transparent, saying that most of the bidders have yet to prove they are not linked with Salim Group.

"Whoever buys the stake in BCA, it would be powerful," Basri said. "I am afraid that the old power elements might stage a come-back, and I am not only talking about Salim."

Suharto's family used to own around 30 percent of the bank, he said.